If you’ve been turned down for a traditional car loan, a buy here, pay here dealership can feel like your only way to get a vehicle. These dealerships let you finance and pay for the car directly through them, which makes the process quick and accessible. That’s why they often appeal to people with poor credit or little cash for a down payment.
But speed and convenience come with trade-offs. Buy here, pay here loans usually have higher interest rates, limited vehicle choices, and stricter repayment terms. Before you commit, it’s important to know exactly how they work and what alternatives could save you money in the long run.
How Buy Here, Pay Here Dealerships Work
At a traditional dealership, you usually get financing through a bank, credit union, or online lender. The dealer helps arrange the loan, but you make your payments to the outside lender.
Buy here, pay here dealerships work differently. They act as both the seller and the lender. You finance the car directly through the dealership and then make your payments to them, often weekly or biweekly. This setup makes it easier for buyers with poor credit to get approved, but it also gives the dealership more control over loan terms, interest rates, and even repossession policies.
Pros & Cons of Buy Here, Pay Here Financing
This type of in-house financing has both advantages and serious drawbacks. Knowing both sides can help you decide if it’s the right choice.
Pros
- Easier approval: Many dealerships do not check your credit report, so past credit problems may not matter.
- Low or no down payment: Some lots let you drive away with only a few hundred dollars upfront.
- Simple process: You shop, finance, and pay in one place, which can be convenient if you need a car quickly.
Cons
- High interest rates: Rates often run much higher than loans from banks or credit unions.
- Overpriced vehicles: Some dealers lend more than the car is worth, leaving you upside down on the loan.
- Limited credit building: Payments may not be reported to the three major credit bureaus, so you miss a chance to improve your credit score.
- Higher repossession risk: Frequent payments and tracking devices can make repossession easier if you fall behind.
- Limited selection: Cars are often older with higher mileage, which can mean more repair costs down the road.
Buy Here, Pay Here vs. Traditional Auto Loans
It helps to see how buy here, pay here financing stacks up against traditional auto loans. The biggest differences show up in approval requirements, interest rates, and whether your payments help build your credit score.
| Feature | Buy Here, Pay Here Loan | Traditional Auto Loan |
|---|---|---|
| Loan source | Dealership finances the loan directly | Bank, credit union, or online lender |
| Interest rates | Often 10–24% or higher | Usually lower, based on credit score |
| Credit reporting | May not report to credit bureaus | Almost always reported |
| Down payment | Sometimes low or none | Usually required, often 10–20% |
| Repossession risk | Higher, with tracking devices and frequent payments | Lower, repossession only if you default |
| Vehicle selection | Limited, often older or higher mileage | Wider selection, including newer cars |
This side-by-side look shows why traditional auto loans are usually the smarter choice. Even if you have poor credit, paying more upfront or working with a cosigner often costs less in the long run than a high-interest buy here, pay here loan.
Better Alternatives to Buy Here, Pay Here Loans
If you need a car and your credit history is not great, buy here, pay here financing is not your only choice. Exploring other options can save you money and may help improve your credit score over time.
- Online lenders: Let you compare rates and loan terms quickly so you can see the best deal available.
- Banks and credit unions: May offer bad credit auto loans to borrowers who have lower credit scores, and they report to credit bureaus, which helps you build your credit score.
- Cosigner loans: Increases approval odds if a friend or family member with better credit applies with you, but both parties are responsible for payments.
- Secured auto loans: Allow you to use savings or a certificate of deposit as collateral, often leading to lower interest rates.
- Buying with cash: Choosing a less expensive used car can help you avoid financing costs altogether.
These alternatives often require more effort upfront, but they can provide better terms and improve your long-term financial outlook.
How to Find Buy Here, Pay Here Dealerships Near You
If you still want to explore in-house financing, finding buy here, pay here dealerships is straightforward. You can search online for the term along with your zip code, or use tools like Auto Trader that let you filter by down payment, payment amount, and frequency.
Many of these lots are small, family-owned businesses, though larger franchise dealerships sometimes offer the same type of financing. Keep in mind that while they are easy to find, buy here, pay here loans should only be considered if you have no better alternatives.
Final Thoughts
Buy here, pay here dealerships can make it easier to get into a car when your credit score is low or you lack cash for a down payment. But that convenience comes at a steep price. High interest rates, limited vehicle choices, and little chance to build your credit score can make these loans far more expensive than they seem at first.
Before you commit, compare every other option available—banks, credit unions, online lenders, or even paying cash for a less expensive car. Many of these choices will save you money and give you a better chance to improve your credit score over time.
If you do move forward with a buy here, pay here dealership, treat it as a last resort. Go in with your eyes open, know the risks, and be certain the loan terms fit your budget so you don’t end up worse off than when you started.
Frequently Asked Questions
Do buy here, pay here dealerships check my credit?
Many buy here, pay here dealerships do not check your credit report. That is why they attract buyers with poor credit histories. Some larger dealerships may run a soft check, but approval usually depends more on your income and ability to make the payments.
Do buy here, pay here dealerships offer warranties on their vehicles?
Some dealerships include short warranties or service contracts, but many cars are sold “as-is.” If a warranty is offered, it often covers only limited repairs for a brief time. Always ask what protection is included before signing the contract.
Are there any fees associated with buying a vehicle from a BHPH dealership?
Yes, most dealerships add extra charges for paperwork, registration, and taxes. Some may also include hidden fees in the loan itself. Ask for a full breakdown in writing so you know the total cost of the purchase.
What happens if I miss a payment?
Missing a payment can trigger late fees and may lead to repossession, sometimes after just one or two missed payments. Because payments are often weekly or bi-weekly, the risk of falling behind is higher than with a traditional loan.
What if I want to pay off my loan early?
Some buy here, pay here dealerships allow early payoff, but they may charge a fee for doing so. Review the contract carefully to see if there are prepayment penalties before committing to the loan.
