You can get a pre-owned vehicle and obtain financing all in one location by using in-house financing dealers, also called “buy here pay here” dealerships. These dealers could be the best option for getting a loan for your car if traditional auto lenders are refusing to turn down your request. However, be aware that taking this route could cost you dearly.
In-house finance dealerships may be able to help you if your credit score is keeping you from getting a car loan.
A “buy-here-pay-here” dealer, also known as an “in-house financing” dealer, offers finance directly to prospective auto buyers. Since these dealerships finance vehicle purchases themselves, they do not need to obtain approval from banks or another lender to approve your loan. Pay-here and Buy-here dealers set their requirements for loan approval.
It may sound a lot simpler than the usual car loan procedure. The drawback? You’ll likely be paying a lot more interest for the car that way.
Taking advantage of in-house financing at dealerships
There might not be an auto loan for someone with poor credit or no credit history. They may not even have the cash they require for a down payment for their car.
However, in-house financing dealers offer loans at their discretion, without the down payment and credit requirements of traditional car loans that might apply. This allows certain people to obtain an auto loan even though they would not be able to otherwise.
The car you’ll be able to purchase from a pay-here or buy-here dealer likely won’t have the latest technology (and could not be the car you’ve always wanted). However, you can be sure it will at least get you started on the road.
The downsides of pay-here, buy-here dealerships
While a more flexible lending requirement could give you the car you want, borrowing from an auto dealer that buys here, pays here comes with a few major drawbacks.
In the beginning, you’ll probably be paying a higher rate of interest than you would pay for an ordinary car loan. The loan could even be a precomputed interest credit that could be the biggest financial risk.
Pay-here and Buy-here dealerships might charge higher prices for the vehicles they’re also selling. Because you can only avail of financing in-house for cars at the dealership’s lot, you’re only able to purchase from the dealer’s inventory. So, you’re not able to look around for a good bargain.
In addition, buy-here, pay-here dealerships can loan as much as they wish and decide to set prices according to their needs. That means you may end up with a lot more debt than your vehicle is worth, making the “upside up” on your car loan right from the beginning.
Are loans made by in-house finance companies disclosed to credit bureaus?
Car dealerships that buy pay here could or might not report your loan to consumer credit bureaus, and it’s entirely up to them. It is important to know this before purchase to have your payments reported to help build credit.
Another negative you should consider: While dealers that offer financing in-house might not be able to verify your credit, others can mitigate any risk associated with lending through other methods. One method is to install an electronic device inside your vehicle to disable the vehicle or repossess it in the event of missed payments.
How can you locate financing at in-house dealerships?
It’s generally not difficult to locate an in-house financing dealership. You’ve probably walked past a lot of them. Be on the lookout for signs that read things such as “buy here pay here, buy here,” “no credit required,” “no credit -it’s not a problem,” or “no need for a credit check.” An easy internet search for car dealerships or in-house financing vehicle dealerships, and the name of your city, could also be the answer.
Before you go to a dealership, make a phone call to inquire whether they can provide financing on their premises that could meet your requirements. Talk to your friends and relatives who may have suggestions on specific car dealerships to stay clear of.
Bottom line
Although an in-house finance dealership could seem like your only choice to purchase a car in the event of no credit or uncertain credit, however, it is advisable to check your alternatives first.
Be aware that buying a car through a buy-here-pay-here dealership is likely to cost far higher than financing your vehicle via a traditional loan provider, and it’s best to start by looking at banks, credit unions, as well as other dealerships for cars.
If you are having difficulties obtaining traditional financing, think about finding an individual co-signer and improving your credit score before buying a car, in case you have the time. The dealership should only be considered a last resort in light of the numerous negatives of purchasing a car from in-house finance.
