When it comes time to arrange financing for a car purchase, many find that the credit criteria for car loans makes it difficult to qualify. When this is the case and a traditional loan is not available, buy here pay here car lots can provide a car loan without the typical credit requirements for financing. This can make getting financed easier, however this can also make getting out of debt, more difficult.
There are a few aspects of how buy here pay here car lots work that need to be understood. They primarily consist of the following:
1) Interest rates – Finance rates for car loans provided by buy here pay here dealerships can range from 8% all the way up to the state cap of 29% (depending on the area that you live in). Yes, you will pay a much higher rate at a bhph lot.
2) Sale prices – You’ll always pay a higher price vs buying at a regular car dealership. This is commonly justified as being because you’re “buying credit”.
3) Down payments – Money down is frequently required because the car lots wants to reduce their risk and want most of their cost for the vehicle covered up front.
4) Warranties – There is never a warranty (never say never, right?) provided for a used car purchased from a dealership that offers bhph financing. Only in cases where an aftermarket or third party extended warranty is offered, is any type of warranty coverage available. Typically, all used cars sold under bhph financing have no warranty at all.
In summary, buying a car with bad credit from a buy here pay here dealership is tough business. Rates are higher and it simply takes longer to pay the vehicle off, as most of the monthly payments are all put towards the interest of the car loan rather than the principle.
