How Do "Buy Here, Pay Here" Car Lots Work?

Buy-here-pay-here car lots are car dealerships that finance their own cars.

What this simply means is that they will hold the title to the car while you make the payments. When the payments are complete, they will give you the title and ownership of the vehicle. This is in contrast to typical dealerships that arrange a real auto loan for you.

Buy here pay here car lots typically do not pull your credit report.

So, there usually is no credit check involved. Sometimes, these types of dealerships don’t even want to know if you have a job or not. If you don’t pay for the car, they just repossess it and sell it again to the next guy that has a down payment.

Buy here pay here dealers also usually charge very high interest rates.

Although there is a cap, or maximum rate, that they can charge by law, it is usually still incredibly high and can exceed 28%. Using this type of dealership is one of the most expensive ways to purchase a vehicle.

Buy here pay here places also require a down payment.

The larger the down payment, the more “car” you can get financed at one of these types of places. The dealer will usually try to “work you for cash” and get as much for a down payment as possible. This is usually used to cover the cost of the car and then what you pay in payments and interest charges is mostly profit.

Buy here pay here car dealers do not report to a credit bureau.

So your credit will not be repaired by making timely payments. They are also not a good credit reference because if you have had to use one of these types of dealers, then you will be immediately perceived as having really bad credit, by a potential landlord or cash advance company.

There are better alternatives, if you have bad credit.

If you’ve been thinking about getting a car at a buy here pay here car lot, there are other options available to you that you may not be aware of. You can secure a real car loan at better interest rates and payment terms that will also help you to rebuild your credit.

We have many more Credit Repair Articles Now Available.