If you’re in the market for a new car, but low on credit and cash, “buy here, pay here” financing could be your only option.
There are both pros and cons to purchasing a vehicle through these types of car lots.
It’s possible to find honest, reputable dealerships if you do your homework before taking out the loan. But, there’s also the possibility that you’ll get talked into a contract loaded with hidden fees and a super high interest rate.
It’s important to educate yourself before making any big financial decisions. Let’s take a look at the pros and cons of financing through a buy here pay here dealership.
Cons of Buy Here Pay Here Financing
The biggest pitfall of purchasing through a buy here pay here lot is the interest. It’s substantially higher than what you’d pay at a bank. This is why these lots are usually last resorts for consumers looking to purchase a vehicle.
It’s very important to read the fine print on any financial contract. You should review it carefully and look for any hidden fees.
Check your contract for the following:
- administration fee
- price of the vehicle (make sure this is what you agreed to)
- auto inspector fee
- delivery fee
Large Down Payment
Most buy here pay here dealers require consumers to put a large down payment on their vehicle purchase. This ensures that if you default on your payments, the dealership will have already collected enough cash to make it worth their while.
They may also accept a vehicle trade-in as a down payment.
Pros of Buy Here Pay Here Car Lots
No Credit Check
The most attractive trait of a buy here pay here lot is that most don’t run your credit score. This can be a downfall if your credit is good, but a big advantage if your credit is less than perfect.
Improve Your Credit Score
Many of these car lots report your payment history to the credit bureaus. This could be a great way to work on improving your credit score. However, not all do this; be sure to ask your dealer.
You may have a variety of options when it comes to your payment schedule. Some dealerships with “in house financing” will work with you on a payment schedule. You might be able to choose weekly, bi-weekly, or monthly payments.
One of my best friend’s parents owns a Buy Here Pay Here lot. This lot has one of the best reputations in town. The owners are honest, fair, and at times, too generous. This has led them to build an incredibly successful business that leaves their customers extremely satisfied and always coming back.
However, this isn’t always the case. You need to do your due diligence and make informed and educated decisions when you decide to shop for a car. Be sure to negotiate on price, check for hidden fees, and only sign the contract if you completely understand what you’re agreeing to.