The History of Buy Here, Pay Here Dealerships

Close-up of headlight on a black vintage car on the road
If you’ve been in the market for a new vehicle recently but your credit or financial history is less than stellar, your options may have been severely limited. With few dealers or financiers willing to work with consumers who have previously declared bankruptcy, or whose credit is simply no good, then the only options available may be Cincinnati buy here, pay here dealers – and for many folks, that’s a good thing. These buy here, pay here dealers represent a very viable lifeline for customers with no other alternatives, and often a consumer can walk (or, more likely, drive) away in a vehicle that works great, fits his or her lifestyle, and didn’t cost an arm and a leg to get.

But for those not familiar with the inner workings of a buy here, pay here dealership, the entire system can seem a little confusing. “How is it different from a traditional dealer,” one might ask, “and why might this be the right choice for me?” But just a little knowledge of where buy here, pay here dealers came from and why they continue to be so successful to this day may shine some light on why these unique businesses cater to so many customers in need each year.

Got questions about how buy here, pay here dealers got their start in America? Here’s a quick look at the history of buy here, pay here dealers and what you can expect from visiting one of these well-respected institutions.


First Off – What Is A Buy Here, Pay Here Dealer?


A buy here, pay here dealer differs from a traditional car dealer in that the consumer can actually finance the vehicle through the dealer directly rather than through a third-party bank or lender. This is, overall, more profitable for the dealer and therefore allows for easier approval for consumers with poor credit or shaky financial histories. For many post-bankruptcy consumers, this may be the only option as other lenders are more apt to deny borrowers with bad credit than a buy here, pay here dealer.

In order to guarantee their own security, however, buy here, pay here dealers often charge higher interest rates than other dealers, and may require a larger down payment. This can be a bit of an inconvenience to some consumers but, with no other available option, it offers a viable alternative to not getting a vehicle at all. However, because you are negotiating directly with a dealer when it comes to financing, it may be easier to come to the agreement that works best for you.


How It All Got Started


The buy here, pay here wave first hit the U.S. during the economic downturn of the early 1970s, when unemployment was high and, for many consumers, building credit became very hard. With few consumers able to buy vehicles outright with cash or secure decent financing from third-party lenders, it only made sense for auto dealers to begin financing directly to consumers themselves. This way consumers could get the vehicles they needed while dealers could open a new revenue source from interest collected on loans. This proved beneficial to consumers, sellers, and the economy in general and boosted the auto industry during what would otherwise have been an especially slow sales period.


Why It’s Back In Big Demand


After the Great Recession of 2008, consumers facing rising unemployment and falling credit rates once again began to turn to buy here, pay here dealers to find and finance vehicles. Though the industry has undergone a good deal of reform since its early days in the ’70s – including state-based limits on interest rates and late fee charges, among many others – the industry remains as popular as ever among consumers with bad credit in need of a reliable vehicle.


What To Look Out For


While many buy here, pay here dealers can indeed offer an excellent alternative to traditional car buying for bad credit or low credit buyers, there are – as with any industry – those who take advantage, meaning consumers have a few things to watch out for when shopping at buy here, pay here dealers. First, pay attention to your interest rate on the vehicle; what may seem like a low rate now could compound and build over the course of the loan to a hefty amount. Do your calculations beforehand and try to make a bigger down payment so you are paying interest on less principle over the course of the loan.

It’s also important to make sure the terms of your loan are finalized and not conditional before signing, otherwise details like your interest rate or amount due each month could change at the dealer’s discretion. Finally, try to avoid balloon payments that allow you to make small payments now and a much larger one toward the end of the loan; they usually just don’t work, and it’s a good way to find yourself in trouble down the road.


Benefits You Should Expect


That said, there are plenty of benefits you should expect to reap from financing a vehicle through a buy here, pay her dealer. Taking out a loan, even one with a high credit rate or for a low principle, can positively affect your credit score with timely payments and responsible borrowing. Make sure your lender is reporting your responsible borrowing to the major credit industries and you will likely start to see your credit score rise over time.

Second, and perhaps most obviously, is that this kind of loan actually comes with some capital you can hold on to – a vehicle. Other loans typically do not have physical capital attached, and for many low-credit borrowers having a vehicle is absolutely essential to getting to work and paying off that very loan. As far as credit-building loans go, few are more inherently useful than a buy here, pay here car loan.


The Future of Buy Here, Pay Here

After forty years of successfully helping consumers in need of easy-to-obtain loans, it seems likely that the buy here, pay here industry will exist for bad credit consumers for years to come. So whether you’re suffering from a poor credit history or simply can’t get a good loan at a traditional lender, check out your local buy here, pay here dealers – they may just have everything you’ve been looking for.