When buying a car, most of us go through the traditional route of
dealers who utilize a number of lending sources to secure car loans.
While this may be the weapon of choice for people with decent credit
scores, for those with less than stellar credit, it can be a tough road.
lenders are hesitant to grant loans to folks with below average credit
scores, and even if such loans get approved, many of these buyers will
find themselves looking at sky high interest rates. With the more recent
economic downturn, many dealers are opting to play it safe and only
work with people who are in good standing with their credit.
is an option for credit challenged buyers, however, the buy here, pay
here lot. Buy here pay here dealers are set up where you buy the car and
make your payments directly to the dealership. This is known as
in-house financing and typically does not show up on any credit report.
working with a BHPH, you make monthly or bi-monthly payments directly
to the dealer, and most often you are required to make the payment in
person, either with a check or cash. Some dealers have been known to rig
their cars with a timer, designed to disable the engine if the payment
date is missed. Once payment is brought in, the timer is reset for
The biggest difference between traditional
dealerships and BHPH lots is the order in which things occur. With
traditional dealerships, you find the car you want and then discuss the
financial arrangements. With BHPH, they determine your financial
standing and then basically tell you what car or cars you are qualified
for. This takes much of the joy out of shopping for a car, since nobody
likes to be told what they can and cannot have, but it is a cold, hard
truth of the business.
A typical visit to a BHPH lot will begin
with having your credit pulled, the dealer developing an understanding
of your financial situation, and then showing you a number of cars that
you qualify for. Obviously BHPH lots are one of the prime stopping
points for anyone who has had difficulty obtaining an auto loan.
There are three main benefits of going the BHPH route.
BHPH lots allow credit challenged folks to still be able to buy a car.
In cases where the credit score is exceptionally low, a BHPH lot may be
the only game in town.
2) It provides an opportunity to begin
repairing your credit. Making payments on time, or even paying the car
off early can really help to improve your credit score. Be advised that
not all BHPH lots report to the credit agencies, so make sure and ask if
they do before doing business with them
3) BHPH lots are also
more forgiving of older model trade ins, because they see the value
inherent in getting the most long term use out of these cars. Many may
actually go back out on the lot and be sold again, as opposed to
traditional dealerships that wholesale out their older trades.
course, as with any car dealership, there are good ones and bad. The
car industry has gone out of its way in many instances to earn the lousy
reputation that it has. Don’t blindly walk onto and buy from the first
BHPH lot you come to. Take the time to check them out and determine if
they are legit, if they offer a quality service, and most importantly,
if they report their deals to the credit agencies (Equifax, Experian,
If you do find yourself having to purchase a car in
this manner, make your payments on time, each month, every month.
Preferably before the due date and ideally more than what is required.
Paying your car off early will really help your score, and have you back
in the traditional dealership setting buying much better cars for
better interest rates in a fairly short amount of time.
credit is not forever. By developing and exercising good financial
habits, you can become a much sought after customer! Now go therefore
and ride in style.
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