Buy Here, Pay Here Car Lots: Important Aspects You Should Consider

Vehicles cost a lot of money, and this doesn’t only include the downpayment and interest rate. Without a car, a consumers’ job options are limited to where they live. Similarly, many students need a vehicle in order to commute to/from school. Buy here, pay here car lots specifically work with consumers that don’t have the credit requirements and time to go through traditional loan applications. After all, many banks and lenders follow a strict criteria when they consider potential borrowers. College students, first-time buyers, and those with a bad credit score are more likely to get denied.

It shouldn’t be a surprise, therefore, that buy here, pay here car lots are much more flexible. Not only are their credit requirements relatively minimal, but they also ask for a very small downpayment. Above all else, buying a car through these dealerships is quick and easy. In fact, consumers may even have room to negotiate a lower price, especially when they go through a reliable seller.

Flexible Requirements

Buy here, pay here car lots work with auto loan applicants that have bad or poor credit. Just as importantly, they ask for a minimal downpayment, which makes their loans within many people’s grasp. That is to say, college students, first-time homebuyers, and others may benefit from buy here, pay here car lots’ offers.

Lax Credit Screening

A FICO score that’s below the 600 range is considered bad. Consumers with a ‘bad’ credit score are less likely to get approved by a traditional auto lender, such as a bank or financial institution. Buy here, pay here car lots, meanwhile, specifically cater to buyers in this criteria. They consider applicants that don’t have an established credit history, as well. Their interest rates are relatively high, but the minimal downpayment may offset this.

Paying Less

In general, buy here, pay here car lots ask for around $500 before handing someone their new car keys. Traditional auto loans, meanwhile, require an average downpayment of about 12% the vehicle’s value. A $10,000 car, for instance, would cost $1,170 up front, while a $15,000 auto loan will come with a $2,106 downpayment. Equally as important, banks and financial institutions follow a strict criteria when they determine a car’s value. This gives buyers little-to-no room to negotiate. Buy here, pay here car lots, on the other hand, might be more flexible.

auto loan payments becoming lower

A Trustworthy Dealership

Since the car dealer is also providing the auto loan, buyers can discuss long-term deals. For example, a college student may want to purchase a relatively cheaper car. However, three to four years down the road, they plan on trading it in for a newer vehicle after they graduate. A car dealership can provide a loan that suits the student’s current budget and potentially fulfills their future goals, such as when they refinance the loan or transfer it to a newer vehicle. While banks and financial institutions certainly offer similar advice, they may not thoroughly understand the auto market landscape. A dealership, on the other hand, could discuss potential future models, price trends, depreciation, and more in-depth details. First-time buyers, in particular, can largely benefit from this.

Finding a reliable dealer is also important because some buy here, pay here car lots don’t report your payments to the credit bureaus. In other words, they don’t allow you to build your credit, even if you consistently pay on time. Nonetheless, national and reputable sellers do report these payments. Consumers should always ensure that they work with a buy here, pay here car lot that does. As their credit score grows, so will their eligibility for more favorable loans. In the long-run, buyers can save thousands of dollars on interest payments and refinancing fees.

Fair Value

One of the main concerns that many people have about buy here, pay here car lots is that they may charge more than a traditional lender. Instead of looking at the car’s fair value, dealerships can charge consumers more. This is especially true when a buyer has bad credit or doesn’t understand the process well enough. However, buy here, pay here car lots also have every incentive to charge a reasonable price. A lender with bad credit is more likely to default on a loan, to begin with. An unaffordable payment only increases the dealership’s risk.

In fact, sellers may even offer a discounted price to regular customers. For instance, if someone’s relatives or friends bought a car from a certain dealer, the firm may provide them (and their family members) with favorable terms in order to retain their business. 

Happy customer walking to their car

Buy Here, Pay Here Car Lots: A Simple Process

Another benefit to buying a car directly from the dealership is simplicity. First of all, buyers choose their vehicle, negotiate the price, and conclude the financing paperwork in one place. In other words, the dealership acts as both the car seller and auto loan provider. Secondly, this process is relatively quick. Buyers don’t need to shop around for loans, understand the requirements of each lender, and compare offers from different banks/financial firms. Instead, they save plenty of time and complete all of these processes at the dealership.

This, alongside the lax screening requirements and minimal downpayment are the main advantages of utilizing a buy here, pay here car lot. Working with a trustworthy and reliable dealership makes things even more convenient. Although buy here, pay here car lots have certain downsides, going through a traditional lender isn’t an option for everyone. After all, while building your credit takes time, a job offer or a new school semester can’t wait.

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