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Do You Need Full Coverage for Buy Here Pay Here Cars?

Yes, you will be required to carry full coverage insurance for a vehicle that you purchase at a buy-here-pay-here (BHPH) dealership. Since the vehicle is technically financed, the lender will require the protection to ensure that their financial stake is protected. This is true of most any car that is financed. If the car is totaled, and you don’t have insurance, than the lender will lose all of their investment. In many cases, if you drop coverage on the vehicle, the lender has the right to purchase a policy in your name and add the additional expense to your monthly premium.

How Does BHPH Work?

BHPH dealerships prey on people who have had credit missteps in the past, who have a high debt-to-income ratio, or may have a low net income. Any of these three will prevent a person from being approved by a large, more traditional lender.

BHPH dealerships offer anyone a loan because they do not do a credit check. Many will go to the extent of calling the references that you list and contact your employer to verify employment, but that is it. All they really require is that you can show a pay stub, proof of full coverage insurance, and have a down payment. Furnish those and you can drive away with the car of your choice, but what do you get in return?

Not much worth having. All of the vehicles you can choose from are at least eight years old and have high mileage. There is no warranty. Since there is no warranty, many of these dealerships offer extended warranties that are expensive and rarely cover anything. Everyone of these vehicles is going to be priced far above average retail. Last of all, the majority of these loans are not reported to any credit reporting agencies. That usually leaves a buyer in a vicious cycle of over-priced junkers that is hard to escape.

Your Alternative

If you are considering a BHPH dealership, you should look online first. There are many companies who specialize in alternative lending. These lenders understand that you may have stumbled with your credit in the past. They also know that you have to be offered credit in order to build credit, so they are glad to originate loans for first time borrowers. We can help you find one. It’s what we do. Go here to apply online.