Buy here, pay here dealerships are a way for people with less than perfect credit to buy a car. The dealerships act as both the car dealership and the bank, allowing customers major banks may consider “high risk” to finance a car. Though on the surface this may appear wholly generous, these companies can come with risks.
If your credit is not bright and shiny, you may find a buy here pay here dealership to be a solid alternative to traditional dealerships, who generally work with major banking institution with stricter guidelines about to whom they will loan money. If you're financially secure but your credit has taken a hit for some reason, the former could be a feasible option.
Let’s face it: if your car breaks down and the cost to repair is more than it’s worth, buying a newer vehicle is a sound financial investment. But your car won’t always break down when you are flush with cash. If you use a buy here pay here option, they are more likely to work with you if you don’t have a large down payment. Of course, wherever you buy, the larger the downpayment, the shorter the loan term.
Some buy here pay here dealerships will report your payments to the major credit reporting agencies, including Equifax, Experian, and TransUnion. As long as your payments are on time, dealing with a buy here pay here dealership will positively impact your credit. Make sure the dealership you choose to work with reports payments to the credit reporting agencies.
With buy here pay here dealerships, you often have the option of setting your payment date. That means you can set due dates that align with your paychecks. If you would rather make two payments per month instead of one, that generally isn’t a problem, either. With major banks, your payment is due when they tell you it’s due, even if that's an inconvenient time.
When you go to a major car dealership to buy a car, the process usually takes hours. For many people, that means an entire day off from work. If you can’t do that, it may be weeks before you can drive your new car. When you use a buy here pay here dealership, you can usually take care of the entire process in an afternoon.
When you work with a buy here pay here dealership, you are often charged much higher interest than you would be at a major bank. This is because the dealership is shouldering a higher level of risk because of your credit score. You can minimize the interest payments by paying your loan off earlier.
You will need to carefully read your buyer contract to ascertain whether you're getting a warranty along with your new car. Commercials and other advertising materials may imply this provision, but the fine print can tell a different story. A warranty is essential when buying a used car because they are more likely to break down than newer vehicles.
With the higher interest rate, and other fees the dealership tacks on, your loan may end up being for more than the vehicle is worth. Your car will depreciate the moment you drive it off the lot, so be aware of just how much you are borrowing. You can use a site like Kelley Blue Book to determine the value of the car in which you’re interested.
If the buy here pay here dealership does not report to the major credit reporting agencies, you are not rebuilding your credit. If this is a priority for you, then shopping around will help you find a dealership that reports to the three organizations. Any time you have an opportunity to build your credit score, you should take advantage of that.
While you know you are a great person who intends to make every payment on the vehicle you are purchasing, experience has shown buy here pay here dealerships not everyone is that trustworthy. Because of that, the dealership may install a tracking device on your vehicle to help them in the event that you default on your payments and they need to repossess the car.