3 Things You Must Know About Buy-Here-Pay-Here Car Lots
March 16, 2016 / Sara Davis / Finance a Car
Getting an auto loan can be difficult, especially for someone with a less than great credit score. But that doesn't mean it's impossible to find a financing option to help make a necessary car purchase.
If you've been turned away from several lenders, but you need a car fast, you might be considering a Buy Here, Pay Here car dealership.
These are slightly different than the average used car dealership.
Not only will the business sell you the car, but it will also loan you the money you need for the purchase.
A buy here pay here dealer can be a lifesaver if you find yourself in a tough situation. However, if you don't to the right research, they can also be detrimental to your finances and your already-damaged credit score.
If you plan to make use of a buy her pay here dealer's services, be sure to consider a few factors first.
Check Out The Car
Michigan Radio advises anyone who is considering buying a car at a buy here pay here dealership to make sure the car is in good enough condition.
Ask to test drive it and consider having a mechanic take a look at it before you agree to driving it home. These dealerships often don't mind buying older cars that aren't in pristine condition.
If you buy a car on the brink of a breakdown, you may wind up paying more than anticipated in repairs.
Research The Price
Before buying any car, whether it's at a buy here pay here dealership or elsewhere, the buyer would do well to look up the value of the car on Kelley Blue Book or a similar service. This is especially important, as it can be easy to agree to a price that is much higher than the car is worth when you're just relieved to find a dealership willing to help with the financing at all.
When you discover the average price of the car, ask what the down payment is. Michigan Radio explained sometimes the down payment covers the cost of the car, while the payments and interest translate into profit for the dealership.
On the other hand, Constellation Auto, a company that provides software for buy here pay here car dealers, explained this is no longer a typical practice for these car lots.
Instead, the interest collected is usually to make up for bad debt charge-offs, a common aspect of this business model.
Ask About Credit Reporting
Before you agree to buying the car, ask the dealership if it reports payments to credit bureaus.
If you have poor credit, one of the best things you can do to improve it is have evidence of on-time payments reported to these bureaus.
Payment history accounts for 35% of your score - the largest determinant of the final number.
If the dealership does report, you can begin boosting your score with the payments you'll be making. If it doesn't, consider looking around for another one that will.
However, be sure you fully understand what the monthly payments will be. If you can't keep up with them and the dealership does report to credit bureaus, your score could be lowered even more.
Buying a car at a buy here pay here dealership can be beneficial in some circumstances, but it's important that you do your research before agreeing to buy a car from one.
By looking into these three points, you will be able to make an informed decision about purchasing at a buy here pay here dealer