The Truth About Interest Rates in Buy Here Pay Here Dealerships

So you’re in the market for a used car and have considered going through a Buy Here Pay Here Dealership to finance your deal.

You’ve done your research and you’ve weighed your options.  What you’ve found is that a Buy Here Pay Here dealership seems like the best and right fit for you.

That’s when people start swooping in with opinions to share with you, even though you didn’t ask, with stories from their brother’s cousin’s neighbor’s uncle who had a friend named Sally who had an experience once upon a time…

Because there are some myths about Buy Here Pay Here dealerships, we’re going to take a look at one of them to see what’s fact and what’s fiction.

Myth:  Buy Here Pay Here dealerships use the highest percentage of interest rates to get more money from you.

Fact:  There are a couple different reasons why dealerships choose the interest rate they do, but the reputable dealerships won’t chose the highest possible rate.

Interest Rates

Every state has a regulated limit for dealerships and it does vary from state to state.  The maximum amount that a state is allowed to charge is called the ‘state usury limit’.

Unfortunately, some Buy Here Pay Here dealerships used the usury limit. Using the usury limit means two things.

It’s going to generate the most income for the dealership which is good for them but bad for you.  It’s also going to give that dealership a bad reputation which is definitely bad for business.

If you find a Buy Here Pay Here dealership using the highest possible interest rate, shop around.  There will be another dealership who can accommodate you and who wants you to succeed.

Good Marketing

A good Buy Here Pay Here dealership is going to set their percentage based on local competition.  They will set their rates lower to attract more customers.  Responding to competition and offering lower rates makes their dealership more desirable.

They will be making less of a profit by having a lower percentage rate, but they are investing in you as a customer.  Because Buy Here Pay Here dealerships want you to know they practice good business so they will use their percentage rate as a means of marketing.

Dealerships understand that their lower percentage rates mean they’ll get more business. In turn, those customers are more likely to go out and spread the good word about that dealership.  That kind of marketing is priceless.

Another thing to consider is that the dealership who doesn’t use the highest number is making less income off your loan than the one who is using the highest percentage.

It can be assumed that this dealership wants to see you succeed so you can be a returning life long customer.  Everyone wins.