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“Buy Here Pay Here” dealerships are new or used car dealerships that finance the car themselves rather than using the lending institutions. They market their businesses to people with bad credit or low income. Since they serve car buyers who can’t afford bank loans because of their bad credits, they inflate vehicle prices at will and charge high-interest rates on car loans. When a buyer misses even one monthly loan repayment, they aggressively repossess the vehicle without looking back and keep all the money that a borrower had paid. Sometimes they repossess vehicles and resell them creating a continuous flow of profits.
As a buyer, you will need to be wary of buy here pay here dealerships. You may be in a dire need of a vehicle, but you will commit a grave mistake is you buy a car from them without having prior knowledge about their services.
You will need to consider whether you want to buy a car from them. A buy here pay here dealership will be the last option after you have been rejected by all lenders. A new car from these dealers may look fine to you but consider the money you will lose if things turn upside down and the car is taken. You will save yourself from financial stress if you decide to purchase a used car from a private party instead of purchasing a new car from such dealers.
You will need to consider the purchase price of vehicles bought from buy here pay here dealerships. These dealers know that you are desperate for a vehicle, so they will often inflate their prices beyond what is listed on the Kelly Blue Book. Do your homework to make sure that you are getting the best deal.
Also, you need to review their interest rate carefully. You may buy a car thinking that you will pay 12%, and find the actual interest rate to be 20% or more. Make sure that the interest rate quoted is the same as the one pointed in the contract. So, you will need to ask the dealer to give you a copy of a signed contract to verify the interest rates and other agreements.
After verifying the interest rates, be sure that you can afford the monthly payment. According to the survey conducted in the US, about 40 percent of people who buy vehicles from buy here pay here dealerships default on their loan. So you will need to be conservative when making estimates on how much you can afford monthly.