Posted Thursday, Jun 20, 2024
So, you have finally decided to buy a car. Are you on a low budget?
If you take a quick look online, you will realize that BHPH is a great option. It is specifically for financing used cars.
But what exactly is BHPH?
Buy here, pay here is a type of car dealership where you are provided with a car loan. Typically, the two reliable sources of getting a car loan are:
However, since they have strict eligibility requirements, the don’t seem a convenient option. So, instead of making them monthly payment to them, you pay the dealership directly for your car.
The primary difference between a typical vehicle loan and buy-here, pay-here financing is that the local auto dealer is involved in almost every step of the process. This means that the terms of the auto loan agreement are only known to the customer and the dealer. Dealers will occasionally market these loans as “no credit check” loans, which makes them even more alluring to consumers with poor credit.
With the basics out of the way, let’s talk in detail about this in-house financing option:
Used car dealers are experts in working with buyers with low credit scores. This means they cannot get auto financing from a bank.
When buying a car through the traditional route, you send a loan application to an auto loan lender. Sometimes, the dealer offers you the option to send them the application so they can find you the best fit. If approved, you make the payments directly to the lender.
BHPH works the opposite way. Here’s how:
Let’s say that you approach a dealer for a car. You tell them you are unable to secure financing. First, the dealer will finance the car. They will determine how much they can lend you based on the down payment you offer and your creditworthiness. They then choose a car keeping in mind the financing figures. The dealership will provide you with a couple of options, and you can only pick from this inventory. Sometimes, the cars are not up to the mark. So, you might have to keep browsing.
The reason you get approved for BHPH financing is because there’s guarantee approval required. The dealership even throws 0% interest for the first couple of months.
However, BHPH dealerships have security procedures in place to offset the added danger. This can involve a foolproof plan to take your car back if you don’t pay. Additionally, their interest rates may be far greater than those of typical lenders.
BHPH dealerships offer a particular set of prospective buyers’ advantages and disadvantages. If you are considering working with one, consider the following:
In comparison to typical auto lenders, BHPH dealerships have less strict loan acceptance conditions if you have a bad credit score or no credit history. It can be their sole option to purchase a vehicle.
There’s no need to go through an additional loan approval procedure, which can be especially difficult for purchasers with poor credit. The process ends when you purchase a vehicle from a BHP dealership.
Minimal or Non-Existent Down Payment Requirements
While some BHPH dealers may only want a minimal down payment, others may not require one at all. This could seem like the best choice for automobile purchasers on a tight budget.
Your car’s value may decrease faster than the time you take to complete the monthly payments. This is due to the high-interest rate. If the car gets totaled, you won’t be able to sell the vehicle. Moreover, by now, you have probably built negative equity.
This loan will be authorized more quickly, but the interest rate will be greater than what you would have paid for a similar loan offered by a traditional lender.
Some BHPH dealers may require a large down payment to obtain the loan, while others may have minimal or zero down payment restrictions.
Compared to a regular lender, BHPH dealers might provide you with fewer choices to prevent repossession, and some might even utilize shut-off switches and tracking devices to speed up the repossession process for themselves.
You might not be able to utilize the loan to start over or repair your credit history if your dealer doesn’t send your payment information to the national credit agencies. Nevertheless, failing to make a payment might impact you negatively.
It’s essential to find out the dealer’s repossession policy before buying a car. You need to be aware of your options in advance if you are unable to make the monthly payments since state laws pertaining to this subject can differ.
Dealerships differ in their repossession approaches, even within a state, and some might be open to working with you. This is why it is important to build a good relationship with the dealership. Determining whether to sign on the dotted line should be based on your experience at every step of the process.
The best way to avoid repossession is to ensure your payments are made the moment your salary comes in. This will also allow you to divide your income evenly between responsibilities. If you are having difficulty, try to boost your income. Take up freelancing and do what you are passionate about.
Make sure you are aware of your alternatives before considering a BHPH dealership.
To start, find out where you are by looking up your credit scores. It’s possible that you might be able to approach a traditional lender that offers you a loan on bad credit. However, keep in mind that you will still have to meet certain criteria to be eligible.
Next, obtain your credit report’s copy to determine if there is anything you can improve. For example, you can write a letter to the credit reporting bureau to dispute a payment you have made but it’s still on the report as unpaid.
If you have made the decision to take the BHPH route, spend some time investigating local dealers and comparing their offers on cars, their terms for loans, and the actions they might take if you don’t repay the debt. Visit the Marciano Auto Group Inc. website to learn more about their BHPH financing option. For more information, call +1 561-303-1757.