For those of you with bad credit or are even tight on money, this is a great time to try and find a car. There are more ways than ever to find a cheap and reliable vehicle, even if some people say otherwise. Ohio buy here pay here dealerships and plenty of other BHPH car lots have great buying options; oh, and you can ignore what people are saying about the BHPH dealerships. Why? Most of what’s said are misconceptions.
The only thing standing in the way between consumers and a BHPH dealership? These black marks they have developed over the years. Here’s five misconceptions that are still associated with buy here pay here dealerships, and they need to disappear.
Excessively High Interest Rates
Probably the biggest stigma revolving around BHPH dealerships are the interest rates. Yes, they are higher than average, but not excessively high. And when you think about it, these higher interest rates are completely justified.
The primary target audience for a buy here pay here dealership are those with bad credit. BHPH dealerships are there too finance them when no one else will, and for them they are taking a big risk. Because the BHPH dealerships are directly lending the consumer the money, it’s a financial risk for them. If someone decides to stop paying their car loan and take off to Canada, well they just lost out on all sorts of money.
Because of this stigma, people think of them as these great soul-sucking monsters; when at the end of the day they are just a business trying to get by. They need to figure out how too safely make a profit just like the other dealers out there. Like I said before, the interest rates are higher than average, but they aren’t as high that people make them out to be. There are numerous sources online that say BHPH dealerships charge up to or over 30% for an interest rate, which is just an absurd exaggeration.
The interest rate varies from state to state, and most of the dealers charge anywhere between 3%-6% for customers with good credit. For bad credit, the average rate is around 14%. This means, a BHPH dealership will charge at least that and a little more; somewhere around 20%.
Which is a justified number, especially since the interest rate is there to cover any repossession or other financial drawbacks they might experience when directly lending to a consumer with bad credit.
They Aren’t Regulated
This is another one that’s been circulating around for a while. BHPH dealerships still need to report and follow the same types of laws and regulations that other dealerships have to follow. A few examples of this are: state usury laws, the truth in lending act, the used car rule, the red flags rule, and the fair debt collections practices act. Keep in mind, that’s only a few. There are a lot more they need to abide by.
Furthermore, the fact that people are saying BHPH dealerships don’t report the consumers credit score to the bureaus is absurd. Maybe when they first opened they didn’t, but with the amount of regulations that have been set in place, it’s hard to skip out on doing something like that. Especially since it’s starting to become a standard practice for dealerships.
The Down Payment Costs Almost Just as Much as the Car
This is another misconception that’s still sticking around, and this one might have been true when the BHPH dealerships first opened, but not anymore. When the BHPH concept was first established, it was a typical practice to require a down payment that was almost equal to the total cost of the car. But in 2015-2016? That wouldn’t work. Think about it, the total price of vehicles have gone up over the years, and the dealerships are there to finance those with bad credit.
Meaning: if BHPH dealerships are there to finance consumers who are struggling to find financing, how could they logically expect/require a large downpayment? It doesn’t make sense. If they did, then they wouldn’t be able to finance anybody.
No Warranties or Peace of Mind
Again, maybe when they first opened because they couldn’t afford to give out warranties. But, in 2016 the used car market is stronger than ever, and now these dealers can afford it. While the warranty that’s offered may come with a high deductible and it might be hard for some consumers with bad credit too afford, a warranty is still available most of the time. More used car dealers are offering warranties with used car purchases, and some states even require a warranty to be offered if the car comes from a buy here pay here dealership.
While this might be a more expensive-than-average warranty, that doesn’t mean they are out to get you. Again, they are working with consumers who have bad credit, and taking financial risks. But, the benefit goes both ways: you get the peace of mind required on a used car, and the dealer gets a way too keep you in the car. Put down your pitchforks, it’s not a way to trick you.
The way BHPH dealerships make their money is if the car is on loan, and as soon as the car stops running the customer stops paying. Therefore, this warranty helps both of you. It means (if you are a good customer) they want to keep you in the car and paying, and will most likely work with you when it comes to repairing or servicing the vehicle.
A BHPH Dealership is the Only Lender to Repossess Your Car
If you are late or miss payments and are a terrible customer, guess what? They are eventually going to repossess your car. But, they aren’t the only ones that do this. Banks, credit unions, other used dealerships, and new dealerships will repossess your car if you don’t pay them, either.
But the difference between the BHPH dealerships and banks is they can afford to wait longer; buy here pay here dealerships can’t. Yes, they might repossess your car a little quicker than a normal dealership, but that’s because they don’t have the money stashed away to sit around and eat the extended financial loss they are experiencing while you’re missing payments; like the bigger dealerships.
Just because they are likely to repo your car a little faster than other places doesn’t mean they are out to get you. Most BHPH dealerships will work with you to try and get you back on track before repossessing your car; they are still human.
Also, that famous “bait and switch” tactic used by buy here pay here dealerships where they snag a large downpayment then repo the car shortly after for profit is not a likely scenario. Again, maybe when they first opened. But, with the increase in regulations in the year 2016, that’s a little harder to get away with.
They Aren’t Evil
The misconceptions that have bene built up around buy here pay here dealerships won’t go away, especially these five. Which is rather unfair; because most buy here pay here dealerships are truly interested in helping those who come to them as a last resort. Does that mean they are all angels? Of course not, but not all of the other dealerships are angels either. They can use the same exact tactics mentioned above to extort the money out of you.
There very well could still be buy here pay here dealerships out there that try and get away with this stuff, but there could also be other dealers doing the same thing. The difference? These dealerships have so many misconceptions and distrust built around them, everyone will believe it without even doing some research. Not even thinking to give them a chance, or go in to a buy here pay here dealership with a negative and suspicious attitude; which won’t bode well for the dealer or the consumer in the end.