Buy Here Pay Here Dealership: what you need to know of BHPH in 2023

What Is BHPH (Buy here pay here)?

In a buy here pay here (BHPH) auto dealership, the payment for the acquired vehicles is handled internally. These dealerships often specialize in the selling of severely used vehicles and frequently work with clients who have subpar credit. 

Find out more about the benefits and drawbacks of buy here pay here dealerships below.

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Basics of buy here pay here

Auto dealers who offer buy here pay here services provide buyers with bad credit or no credit the possibility of getting on-site financing. These loans typically have interest rates that are much higher than those on auto loans from a conventional bank or credit union.

Usually, within the auto dealerships world, companies use a third-party financier, as payments are not made in-house. 

Of course the buy here pay here finance method is not applicable to third-party dealerships, as the dealers supply their own lease financing without requiring any outer assistance.

One of the main advantages of this strategy is that the buy here pay here dealership can collect the interest income on their leases. 

These dealerships take on riskier loans –more likely to default– therefore they may be more vulnerable to cash flow issues. 

One could say borrowers who utilize the buy here pay here method experience difficulties when trying to find other types of financing.

The buy here pay here is actually very challenging as it targets subprime customers. This increases its overall risks. 

For those with limited financing options, dealerships for buy here pay here are a good alternative as they tend to provide flexible conditions including no down payments, no-interest financing periods, and loans without a credit check at all.

A buy here pay here (BHPH) example

Let’s say you are looking forward to getting a new car, but are currently unable to get a loan from a bank or credit union. In this scenario, a buy here pay here dealership would be the way to go.

In exchange for making biweekly payments and agreeing to a 20% interest rate, the auto dealer offers to finance your car. You also consent to the dealer installing a tracking device on the vehicle in the event that they have to take it back.

Other financing options besides buy here pay here

There are a number of alternatives to using buy here pay here finance if you are having trouble getting a car due to bad credit.

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First, you can think about postponing the purchase of a car until you have enough money to pay for it outright or at least enough for a deposit that will lower the interest rate of your loan. Lenders wouldn’t have to check your credit if you paid in cash, and you’d save money by not having to pay interest.

Getting a cosigner with good credit is another option if you need to buy a car right away. This consignor should be prepared to assume the risk of repaying the loan should you be unable to.

Last but not least, make sure you look for a car loan from sources other than buy here pay here dealerships. Certain financial institutions will make loans to borrowers who are deemed to be more risky. Obtain several auto loan rate quotations from banks or credit unions.

Drawbacks of buy here pay here deals

If you’re going for a buy here pay here dealership include the likelihood that your loan interest rates will be significantly higher. 

More often than not a buy here pay here dealer is highly aggressive about taking back the vehicle to make up for their losses if you don’t return your loan in accordance with the agreements.

Is it a good idea to buy here pay here?

If you have bad credit, a buy here pay here dealer might help you get the car you need. To know if this is a good option for you, you should take into consideration the conditions of the contract and your own financial situation. 

Before making a decision, take a deeper look into the drawbacks of buy here pay here, which may include a frequent payment schedule and high interest rates. Make sure these dealerships are a good fit for you.

Conclusions

Dealerships that provide buy here pay here cars can help those who experience difficulties finding financing options when in need of a car. However, this kind of financing is frequently highly expensive. 

Before getting yourself a buy here pay here deal, think about all your options, such as waiting to buy one or getting a cosigner. 

If after deep consideration you decide to purchase a car from a buy here pay here dealer, make sure you are aware of all the agreements, including how they may take your car back.

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