What is Buy Here Pay Here?
Content Provided by Autotrader.com
If you've found that every other credit avenue for financing a car is closed to you, a Buy Here Pay Here (BHPH) dealer may be your last, and best, resort. Most of us simply can't afford to buy a car with cash. Typically, we borrow money for a car through third-party lenders, such as banks, credit unions and carmaker-associated lending companies. For a variety of reasons, however (such as a spotty credit history, no credit or a very low credit score), traditional lenders may not work for you. If that's the case, there are always BHPH dealers.
What Is Buy Here Pay Here Financing?
BHPH financing means that you arrange the loan and make payments on it at the dealership where you purchased the car. In other words, it's a one-stop shopping process because the car dealer is also the finance company.
Because loan decisions are made by the BHPH dealer, who wants to sell you a car, approval is nearly always guaranteed. If you have an address and a steady income, your chances for approval are very good.
Granting you a loan, however, isn't out of the goodness of the dealer's heart; they will probably make as much, or more, profit on the financing as they do on the car itself. As a high-risk borrower, you can expect a double-digit interest rate.
It's helpful to find a dealer close to your home or work because, rather than mailing a monthly payment, the BHPH dealer might require you to make weekly or biweekly trips to the dealership to pay in person. Although some will accept payment online or by mail or phone, BHPH usually means physically bringing your payment to the dealership.
Benefits of BHPH
- They put credit-challenged borrowers in a car when a traditional lender will not.
- On-time payments can help repair your credit history (but be sure that the BHPH dealer reports payment histories to the credit bureau).
- They buy older cars and will be more willing to take in an old beater toward the down payment of a new car.