Seven Common Misconceptions of BHPH Dealerships
Buy Here-Pay Here dealerships occasionally get a bad wrap, but there’s no justifiable reason for this sentiment. The businesses truly help out those with poor credit, and they work with these customers to find a vehicle that will fit within their budget. There are plenty of positives that accompany these dealerships, but alas, the misconceptions remain.
If you have any apprehension about visiting Buy Here-Pay Here dealers in Ohio, let us help ease your apprehension. We’ve compiled several popular myths that unfair accompany these dealerships, which we debunk below…
Myth #1: Buy Here-Pay Here Lots Sell Beater Cars
Well, it’s hard to call this a myth, as there are probably several Buy Here-Pay Here dealerships that sell beat up cars. However, this could be said about any car business, even if they specialize in “new cars.”
Most BHPH dealerships will offer similar cars to a used dealership. Their inventory is obviously limited to what’s on the lot, but that doesn’t mean there’s anything wrong with the vehicles. Now, if your budget is severely limited, you’re obviously going to have a tougher time securing a nice vehicle. However, if you’re willing (and obviously able) to spend a bit more, you shouldn’t expect any worse of a product.
If you’re worried, examine the vehicle thoroughly in an attempt to identify any troubling areas (like rust or potential water damage). You should also ask the salesperson about the vehicle’s mechanics, and ask if a safety inspection has been done. If the dealership allows it, you should send the targeted vehicle to a trusted mechanic. That way, you can be assured that everything is working properly.
Myth #2: Interest Rate Will be Higher than 30%
There’s no denying that you’re going to be eyeing a high-interest rate when you opt for a Buy Here-Pay Here dealership. Interest is the main way these businesses make money, and they capitalize on a customer’s inability to secure a vehicle elsewhere. Generally, the worse your credit, the worse the interest rates.
While there are several dealerships who may hand out interest rates that top 30-percent, you’ll more likely to find lower, friendlier terms. As ConstellationAuto.com writes, the average interest rate at a BHPH shop is less than 20-percent annual percentage rate. The number most commonly falls somewhere between 12.9-percent and 17.9-percent, which are affordable numbers considering the circumstances.
Myth #3: The Down Payment Covers the Cost of the Car
Even if this was entirely true, you can’t blame these dealerships for being shrewd. Buy Here-Pay Here businesses need to make money somehow, so a down payment will presumably cover the cost of one of the dealership’s affordable vehicles. The logic goes that the subsequent monthly payments and interest rates are all pocket change.
This was true when these BHPH dealerships started popping up in the 1950s, as ConstellationAuto.com notes that the primary business model “was to require a down payment equal or close to the total inventory cost of the vehicles.” However, the website also notes that over time, the increasing price of wholesale vehicles and the declining budgets of customers has made this strategy impossible.
The down payment certainly does go towards the cost of the vehicle, but it’s rarely enough to cover the entire value of the car. The money collected from interest often goes towards paying off any “charge-offs” from the bad debt, and then the monthly payments go towards the rest of the vehicle’s value. Anything leftover, which often isn’t much, then goes to the dealer.
Myth #4: A Dealerships Turns a Vehicle Over Five Times a Year
This is quite ambitious, isn’t it. It’s also untrue, except in some extraordinary circumstances, of course. “Churning” is the process of repossessing a car soon after selling it, and then turning around and selling that vehicle to another buyer. While some (including those in the California government) have acknowledged this as an issue, it’s still a bit ludicrous to expect a dealership to sell the same exact vehicle fives times during a calendar year.
Most Buy Here-Pay Here dealerships are intent on helping their customer pay off the car’s debt. Sure, repossession may give them another opportunity to sell the vehicle, but it’s not particularly easy to push such large inventory, even at such a discounted price.
Myth #5: Credit Unions are the Better Route
This myth can be squashed rather quickly. If your credit is struggling, it’s unlikely that these lenders will even take the time to consider to your request. Even if you found a creditor who was willing to consider you in the special finance category, you’d still be securing a deal that’s similar to those from a Buy Here-Pay Here dealership.
Meanwhile, at those BHPH businesses, you’ll actually be able to negotiate a deal that is advantageous to the lender. These salespeople will work with, assuring that the agreement won’t put you into financial turmoil.
Ultimately, if you don’t have good credit, there’s not a better choice than Buy Here-Pay Here dealerships.
Myth #6: Buy Here-Pay Here Dealerships Aren’t Regulated
This is actually a rather silly misconception. Why would these dealerships be free of the scrutiny that traditional businesses have to deal with. There are a variety of organizations that are regulating these Buy Here-Pay Here dealerships, and the businesses are required to follow several strict laws (like the Truth in Lending Act, The Disposal Rule, The Risk Based Pricing Rule, and The Fair Debt Collections Practices Act.
Meanwhile, As Constellation Auto points out, these dealerships are now reporting to credit bureaus unlike ever before!
Myth #7: You Have to Jump at The First Deal
Some buyers may feel pressured to accept an advantageous deal. We’re not necessarily saying this is a bad thing, but there’s no reason to impulsively come to an agreement on an automobile. You should treat the entire process similarly to how you’d shop for a new car. You’d certainly exhaust all of your options ordinarily, so there’s no reason not to do this with Buy Here-Pay Here dealerships.
Of course, this requires a bit of work on your end. If you’re eying a particular model or type of car, make sure you understand what the vehicle typically sells for. Sure, you’ll have to expect higher values at BHPH dealerships, but these values can still come in handy. Furthermore, it might be in your best interest to shop at several different dealerships. That way you explore the market and see what deal is truly best for you.
See? Buy Here-Pay Here dealerships provide an opportunity for those with bad credit to secure a vehicle. Sure, you’ll have to dish out a bit extra money for interest rates, and the deals are often more beneficial to the seller. However, when you consider the alternatives (no car), the extra fees aren’t that bad.
Of course, as you’ve seen, some customers still don’t view these dealerships positively. They typically associated the businesses with high interest rates or faulty vehicles. As you’ve read, this is certainly not the case. If you were previously one of those people, we hope we’ve turned your opinion around.