A Buy Here Pay Here (BHPH) dealership is one that provides direct car financing instead of working through third-party lenders. The concept originated in the 1970s. During the savings and loan crisis, obtaining credit was difficult, as it was during the 2007-2010 financial crisis. And, as vehicle prices have increased relative to income, auto dealers have sought new ways to sell cars to someone with a less than ideal credit history.
How BHPH Financing Works
Dealerships grew their presence in the consumer finance business by starting their own financing companies. A related finance company (RFC) would be created to approve the loan. Dealers could, therefore, profit on both the sale of a car and on the loan issued to the consumer. Traditionally, when you buy a car, the contract is passed on to an auto lender, but a BHPH dealership sells and finances your vehicle.
In the process, you may have to verify your income. The dealer may ask for proof of residence as well. But most likely, they won’t check your credit. Once they determine a loan amount you qualify for, the automobile dealership will make an offer and show you cars priced within that range.
BHPH vs. Traditional Dealerships
Some dealerships extend loans from financial institutions they partner with. Sometimes they have close relationships with credit unions. But getting approved for a loan this way can take longer. The dealership becomes sort of a middleman between the customer and lender. As with any loan, its terms, especially the interest rate, are determined by your credit score. Borrowers with a lower score are at a disadvantage because they’re considered higher risk, so the rate will be higher.
This is usually not an issue with a BHPH dealership. Even if you have a poor credit history, are rebuilding credit following bankruptcy, or have no credit at all, you can get approval for a loan. The car dealer can repossess your vehicle if you default on payments. And, since dealers don’t usually report your on-time payments to the credit bureaus, being punctual probably won’t improve your score if you’re trying to repair or rebuild your credit.
Benefits of BHPH
Nonetheless, this arrangement has many benefits to consumers who are car shopping and have been turned down by banks and even other dealers. The perks of working with a BHPH dealership include:
- Fewer restrictions on loan approval
- Driving off the lot with your vehicle purchased and financed
- Weekly, bi-weekly, or monthly payment structures
- A vehicle is selected based on the money you can spend
- Full warranties, free maintenance, and possible loss/theft protection
If you have a steady income, you’re most likely to be approved. And, if the dealer does report your timely payment history to the credit bureaus, this can help repair your credit history. You’ll likely need a down payment to purchase the vehicle, but this can vary depending on the dealership. At CarWorld, we’ll help you determine how much you can put down and the monthly payments you can afford.
Shop at CarWorld for No-Hassle BHPH Financing
We have made it simple to borrow money to purchase the vehicle you want. Our Buy Here Pay Here (BHPH) used car lot in Hawthorne offers hundreds of top-brand vehicles. If you’re looking to buy a used car, we are open for business during the pandemic, with a COVID-19 response that includes taking extra steps to keep our facilities sanitary and ensuring our staff follows hand-washing and social distancing guidelines. Feel free to call us at (213) 423-7740 to get started.