What is Buy Here, Pay Here Financing?

December 29th, 2017 by

Hand holding a red and white horseshoe magnet with dollar bills coming toward it

Everyone knows that when you go to buy a new car, you want to have the best possible credit history and a solid financial footing to ensure you can obtain excellent financing options. However, that’s just not always reasonable for the majority of people – many of whom struggle to make ends meet and who may have the shadow of terribly damaged credit following them around for years. Luckily, there are options that exist to help people who may struggle to get traditional financing – one such option is Buy Here, Pay Here financing.

You may be wondering, “what exactly is Buy Here, Pay Here” financing? Even more importantly, you may be curious if Buy Here, Pay Here financing is the best option for you when it comes time to purchase a new-to-you car (let’s face it, if you’re considering alternative financing options, you probably won’t be – or at least you probably shouldn’t be – in the market for a brand new model car). Read on to explore the ins-and-outs of Buy Here, Pay Here financing – you may be surprised to find that your bad credit history may not be as much as a hindrance to owning a quality used car as you thought.


The General Things to Know

The most important thing to know about Buy Here, Pay Here financing is that many dealership who engage in Buy Here, Pay Here financing have a reputation for taking advantage of consumers who have extraordinarily bad credit histories. Essentially, those dealerships are working with people who simply have no other means in which to get a car and they are leveraging that desperation against their customers. Now, this is not to say that all dealerships who offer Buy Here, Pay Here financing are out to get their customers in a bad financial bind – it’s just a warning to be careful to only work with extremely reputable dealers. If you get a bad feeling or the sense that you are being taken advantage of by a Buy Here, Pay Here dealership, simply leave. There are plenty of great car dealers who offer Buy Here, Pay Here financing because they truly want to help those that need a little extra boost.

The gist of Buy Here, Pay Here financing is that instead of securing a loan through a bank or any other traditional financing outlet, the car dealership itself actually serves as the lender. This is because many Buy Here, Pay Here customers have been turned down from every other available lending source, be it a bank or a credit union. The car dealership certainly wants you to buy a car from them, so they are willing to work with you to help you finance the deal – after all, most people don’t have the ability to just walk in and pay cash for a car. Buy Here, Pay Here financing takes the intermediary lender out of the equation – if you opt to buy a car from a Buy Here, Pay Here lender, you’ll only be working with the dealer throughout the entire purchasing and owning process.


The Drawbacks

It is blunt and it is brutal, but it is true: if you’re shopping for a car and your final option is Buy Here, Pay Here financing – chances are you have made some very risky decisions with your money and those decisions have not turned out particularly well. Car dealerships realize this and they know that Buy Here, Pay Here purchasers are a much riskier prospect for them than customers who are able to obtain traditional financing with no issues. To that end, the Buy Here, Pay Here dealership must cover the cost of the potential risk of clients defaulting on their bills… which means that if you opt to use Buy Here, Pay Here financing, you can most likely expect to pay an extremely high-interest rate – think double the standard interest rate. The dealership isn’t necessarily doing this to take advantage of the customer; usually, it’s so the dealer is protected when and if the payments begin to default.

In addition to being subjected to higher interest rates, Buy Here, Pay Here shoppers may also face other restrictions that traditional shoppers won’t have to deal with. Some dealerships make their Buy Here, Pay Here customers come to pay in person either biweekly or monthly. Of course, not all dealerships follow this model and some will let you pay online, but the method of delivering payment is certainly a question you want to ask before you agree to purchase a car from a Buy Here, Pay Here dealer.

The other question you will want to have a very clear answer to is: what exactly happens if you miss a payment? Will the Buy Here, Pay Here dealership grant you a week or two grace period? Don’t be surprised if a missed payment result in repossession. Again, the dealers see Buy Here, Pay Here customers as inherently risky and they aren’t going to gamble on allowing many missed payments before they come and take the car back from you.

One last thing to consider before you head to your local Buy Here, Pay Here dealership is that the selection of inventory you’re going to be allowed to choose from will be very slim compared to that shown to those using traditional financing methods. The cars will typically be much older models – although they should have still undergone inspection to make sure they are roadworthy. You won’t have much of a choice if you decide to use Buy Here, Pay Here financing, so you’ll want to be sure that it’s truly the best route for you to take.


Exhaust Your Options Before You Use Buy Here, Pay Here Financing

It’s clearly not a cakewalk to use Buy Here, Pay Here financing – and it’s not meant to be. Buy Here, Pay Here financing truly is for those who have no other financing options available to them. Before you head to a Buy Here, Pay Here lot, make sure that your credit really is so terrible that it’s impossible to obtaining financing from any other source. Try your bank, credit union – even some online financing companies may float your loan. Exhaust your options before using Buy Here, Pay Here – but if you find that obtaining a loan is simply impossible, don’t give up your dream of owning a car. Simply find a reputable Buy Here, Pay Here dealership that is willing to answer all of your questions and that will actually work with you to help you obtain the best Buy Here, Pay Here financing option possible.