Here is a list of most frequently asked questions about buy here pay here programs, and their answers.
What are buy here pay here programs? How do buy here pay here car lots work?
Buy here pay here programs offer consumers a chance to own a car for a lot downpayment and low ongoing payments. Buy here pay here car lots provide in house financing of cars directly to their customers, bypassing more traditional third party lenders. This provides flexibility in getting the transaction approved.
Even though the car payments look cheap, they stretch over 2 to 3 years. When you compute the final amount of total cash outlay, the downpayment plus all installment payments, you will find that total paid is much greater than the car’s Kelly’s blue book value. People who buy from them typically have low or no credit, and buy here pay here programs are sometimes the only way to own a car.
Why do people purchase cars on buy here pay here programs?
People purchase cars from buy here pay here car lots usually as a last resort. Car shoppers may have tried but were turned down on other car financing options before they bought a car with cheap payments through a buy here pay here program. If they were able to qualify for regular car financing, they would have gotten better terms and prices.
However, buy here pay here car programs may be the only option left for someone to drive a car with the amount of money and low credit rating they have, it can make a huge difference. It could be the difference between having transportation to get to work and making an income, or forgoing that.
To own a buy here pay here car, it usually takes $500 to $2000 for a downpayment deposist, and weekly payments of $50 – $100 (around $200 to $400 a month). The payments usually stretch between 2 to 3 years. These cars are usually priced at higher than their Kelly’s blue book values. Interest rates are between 18% to 25%. Some states have regulations that do not allow for interest rates above 25%.
What type of cars are available in buy here pay here inventories?
You can find lots of different models from popular makers like Dodge, Chrysler, Ford, Kia, Mercedes, BMW, Jeep, Mazda, Toyota, Honda, Nissan and so on. They are usually between 7 to 15 years old, and have 70,000 to 150,000 miles on them. You can find sedans, coupes, SUVs and trucks.
What should I expect when buying from buy here pay here auto sales programs?
At BHPH dealerships, the main consideration for selling you an automobile is your ability to pay. The first step is to evaluate your credit. In more traditional car dealerships, you will enter into a discussion about the type of car you may like to own, and the features and options you are looking for. Financing is discussed at the end of the process.
With BHPH programs, the car dealership aim to evaluate your credit standing before everything else, how much cash you can put down for a car, and the monthly payments you can afford to make. All these discussions take place before letting you know what type car you may qualify for.
Related article: When Purchasing Buy Here Pay Here Used Cars, These Are Top 5 Considerations
How should I prepare myself before purchasing a car from a buy here pay here program?
Prior to visiting the lot, you should have ready documents and information such as your drivers license, proof of auto insurance, recent pay stubs, a list of references with their phone numbers, a utility bill or cell phone bill and cash to make a downpayment. These are the usual items asked for.
You may also want to call ahead of time to inquire about the type of documentations they need, so it speeds up the car purchase process. Speaking with a representative can also give you an idea of how helpful and transparent the dealership may be in doing business. That said, since BHPH car lots get calls from a lot of consumers who are spotty in their credit history who may not be serious, they may not want to get into deep discussions until they are able to verify your credit and level of interest. Some BHPH auto sales dealers also offer to provide online credit approvals, so you know if you qualify with them before visiting in person.
It’s a good idea to research online to check out the type of inventory the car lot may have, and what the typical downpayments and weekly payments are expected. Check out the dealer’s websites and advertisements from various BHPH car dealerships to compare what they could offer. If you are armed with such information, you can be better informed and evaluate that the deal offered to you is a reasonable one.
What type of credit is needed to buy a car from a buy here pay here car lot?
According to an LA Times article from Nov 2011, the average credit score of a buy here pay here program customer is 518. Obviously, the better your credit rating is, the greater the number of deals that you will be eligible for.
That said, it is possible to qualify for buy here pay here automobile ownership even if you have very poor or no credit. Essentially, they are subprime car loans. BHPH car dealerships are most interested in the amount of cash you can put down, and how much you can afford to pay ongoing. If you have a job, or if you are self-employed with a steady income, that will help a lot. Some car dealerships will preach that “you job is your credit.”
I have a car that was previously repossessed, will I still qualify?
Most buy here pay here dealerships will still be willing to work with you if you have a low number of car repossessions, for example 1 to 3 repossessions in the past.
How can I find buy here pay here dealers or dealerships with buy here pay here options?
Some car lots will have the “buy here pay here” label as part of their name, so those are the most obvious ones. More and more, traditional car dealers are also venturing into the buy here pay here market as a separate special department within their dealership. In those cases, pay attention to their advertising. They may not splash the term “buy here pay here” all over, but you can see signs for “special financing department,” “we finance,” “in house financing” “credit rebuilding,” or “no credit car loans” used car programs.
You can check around on various dealer websites and look into the local advertisements. You may also look for these signs when you visit or drive by local car sales dealerships. If you are interested, check out this article on finding good buy here pay here car dealerships.
Usually, BHPH lots require that you make the payments in cash at the car dealership once every week or every two weeks. A few may accept monthly payments, but that’s rarer. The good news is that it is getting easier to make payments for cars at BHPH car lots. More and more, other forms of payments are accepted. These include phone, electronic and online payments using debit cards, credit cards, automated bank drafts or checks.
If you are required to go down to the dealership with cash every week or two, it is preferable to find a local buy here pay here car lot that is easy to drive to from your home or workplace. It is extremely important to make your payments on time! This is why:
Buy here pay here programs have little to zero tolerance for late payments, even if it is just a few days. Some may allow for payments that are a few days late, but tack on substantial late fees. Some will also include a 30-day grace period. It is important to find out if the dealership offers any grace period at all. This is because your car definitely seriously at risk of a repossession once the payment is late, even if it was “only” one or two days.
How does getting on a buy here pay here program help with credit rebuilding?
Purchasing a BHPH car is a means of rebuilding your credit. Most BHPH car dealers will report your successful on-time installment payments to the major credit reporting agencies. This demonstrates that you are able to handle credit well, and it will have a positive impact on your credit score. One of the challenges of someone with poor or no credit is to be able to build up a history and get the credit score up, so that more financial products and services (eg. better, car, mortgage and personal loans) will open for them. Getting on a buy here pay here program can be a first step to rebuilding your credit.
Most, but not all BHPH car lots, will be reporting your payments to the main consumer credit reporting agencies. If credit rebuilding is a goal, make sure that you inquire about how often the car dealership will be reporting on your timely payments before you purchase. Some car dealers also advertise their buy here pay here programs as credit rebuilding car purchase programs.
Can I trade in for a better vehicle over time?
Some dealers offer the possibility of trade ins for another car (perhaps a nicer car) by their customers, after they have proven that they are able to make their car payments over a period of time, for example, 6 to 12 months. Customers like this option because they may be at a really low point in their lives and want to option to move along to driving a better car.
