Buy Here Pay Here (BHPH) dealerships can offer a viable solution to car buyers with bad credit. They specialize in providing auto financing options to those who may have been turned down elsewhere.

However, before visiting a BHPH dealer, you should fully understand how they work, their benefits, and their potential drawbacks.

The benefits of financing through BHPH dealerships

BHPH dealers act as both the car seller and lender. This setup allows them to cater to buyers with low credit scores or no credit history.

A key advantage of BHPH dealers is that they do not emphasize credit checks as much as other dealerships. Instead, they often prioritize factors like income and down payment amounts. This focus can lead to faster approval — some buyers even secure financing the same day.

The drawbacks of BHPH for bad credit buyers

While BHPH dealerships can be helpful, there are certain risks associated with this type of financing:

• Higher interest rates: Because BHPH dealerships cater to higher-risk borrowers, they can charge interest rates exceeding 20%, making financing more expensive over time

• Limited vehicle selection: Most BHPH inventory is used vehicles with high mileage

• Strict payment terms: BHPH dealers may require weekly or biweekly payments that the buyer must make in person

• Aggressive repossession policies: A single missed payment can lead to repossession, given that many BHPH dealerships are less lenient than traditional lenders

How to evaluate a BHPH dealership

1. Conduct research and read reviews: Check out the dealer’s Better Business Bureau (BBB) rating and previous buyer feedback. Look for dealerships with high marks for customer satisfaction.
2. Verify transparency: Ensure the dealership provides clear financing terms, explains the financing structure, and allows vehicle inspections
3. Inspect vehicle quality: Reputable dealerships should offer cars in good condition with an accurate vehicle history. Ask for the CARFAX or comparable documentation. Also, inquire if they’ll let an outside mechanic inspect the vehicle prior to purchase.
4. Avoid red flags: Steer clear of dealerships with prohibitively high interest rates, pressure tactics, or unclear policies

What to look for in a BHPH contract

When reviewing the financing agreement, take the time to examine the following thoroughly:

• Financing terms: Ensure the payment schedule and interest rate are clearly defined

• Fees and penalties: Make yourself aware of late payment fees, repossession terms, and prepayment penalties

• Vehicle condition: Confirm any warranty coverage or “as-is” disclaimers regarding the vehicle’s condition

Is BHPH right for you?

Sometimes, a BHPH dealership may be the only way for individuals with bad credit to purchase a vehicle. That said, do thorough research, understand the terms you’re offered, and evaluate whether BHPH meets your expectations. If they don’t meet your needs, a financing company like Credit Acceptance can get you pre-qualified for auto online. To find dealers near you in the Credit Acceptance network, visit our dealer finder.