BHPH Financing
What is Buy Here Pay Here Financing (BHPH)?
A BHPH loan is offered through the dealership by the dealership. Traditional practices had you get loans through a bank or credit union, usually of your choice. Since lending practices have become tighter it has become difficult for people with average to below average credit to secure a loan. BHPH is a way around this.
With BHPH you get the loan directly through the dealership so you make payments there as well. Depending on the dealership the payment methods vary. Most will only accept cash, sometimes checks and credit cards as well. It is important to ask any and all questions regarding your payment options. Missed payments at a BHPH dealership are treated as missed payments everywhere else. There can be late fees charged and in worst case scenarios a repossession. If your car is repossessed then you owe the full balance and the last thing you want is a car payment with no car.
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What is the difference between a BHPH dealership and traditional financing?
Nothing really. The only real difference are the numbers that go into it. Most dealerships have always offered BHPH financing but advertised it differently. Other dealerships never bothered to take on these types of loans because they are looked at as high risk. Now that it has become almost impossible to finance they're just now joining the party.
How do I know if I should seek out a BHPH dealership?
If you have gotten declined more than one time at a traditional dealership due to credit history then a BHPH dealer may be your only choice. Some people/places will claim that there are different routes.
For example, internet companies asking for your information for instant approval. They advertise things such as no money down, bad credit welcome and no job history needed. Don't let these places fool you. They will either use the same or similar lending practices as a BHPH dealer or funnel you to a BHPH dealer in disguise. Sometimes they will funnel you to dozens of BHPH dealers in your area and you may get phone call after phone call. It is often more hassle free to go into a BHPH dealership and sit down with them face to face rather than getting dozens of phone calls over months from these internet websites.
What are some other terms used to describe a BHPH dealership?
Special finance, Bad Credit Car Loans, No credit Car Loans, No Money Down, Alternative lending. If dealerships advertise something like "We finance" then that is also similar if not the exact same as BHPH. If they advertise things like bankruptcy? No problem or Foreclosure? No problem then that is BHPH. You say tomato I say tomatoe? Something like that. It is all the same if you have below average to bad credit but worded differently.
What credit score or what on my credit will give me an indication that I need to go through BHPH?
This is where it gets very confusing for the experts as well as the people they're financing. Often times the person trying to get you the loan doesn't even truly understand what goes behind some lenders approvals or denials.
Back in the golden days of lending, a 600 score, a job and a $1000 down could take you a long way. Even sub 500 scores with similar factors could get you a nice car. Now that everyone is so picky even a 700 score might not get you what you want. What's the highest score? Somewhere in the upper 800's. The biggest things that will prevent you from getting a car loan are no job, no down payment, no credit history, a repossession, a foreclosure or a bankruptcy. Repos are especially bad because the dealership will scratch their heads and ask "if you don't want to pay the other guy, why would you pay me?
If you have no job you have a 0% chance of getting financed. All the other issues can be overcome.
What if I want to improve my credit history?
Many BHPH dealers offer this service but not all of them. Some will do it upon request only. Others offer it as a selling point to finance with them. Either way you should make sure this is part of the deal. The main reason you couldn't get financed was because of poor credit. This will help build your credit history so you can get better interest rates.
What if I want to trade my car in?
BHPH lots do take trade ins. Although, they usually won't take it as just a down payment. Oftentimes they will give you better trade in value because you are dealing directly with them. They also understand the value much better than if another dealership simply writes down your vin and sends it to a bank. Its way more hands on. A lot of BHPH lots are smaller and need the extra customer base and extra money for your trade in to earn your business can go a long way.
Do Buy Here Pay Here lots rip people off?
This is what scares most people before they even give BHPH a chance. There are many horror stories that go with a BHPH program but not all of them are true. There are different types of BHPH lots that use different methods of financing you. It is also best to understand that BHPH is in essence a high risk loan. How do we know this? Because history has shown us that when financing individuals with this type of credit a lot can go wrong. Cars go missing. People stop paying. People are late. Life happens.
With a high risk loan the cost of doing business goes up in a big way.
So is BHPH the right fit for me?
This is a question you must answer on your own. You need to weigh the pros, cons and ask as many questions about what type of financial commitment you're getting into. Its when you don't ask questions and ignore the fine print that things go wrong. A lot of people with below average credit think that they don't have a choice because of it. Its this type of attitude that will get you in the car that you don't want with payments you can't afford. Don't let a salesman pressure you into a contract where you are destined to fail. Making poor financial decisions is what got you into this situation in the first place its time to start making the right decision!
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