It is difficult to say a buy-here-pay-here (BHPH) lot is a scam…without being sued for the opinion, anyway. But it’s safe to say that BHPH dealers have a reputation as predatory lenders, and the vast majority of them will not help your credit.
Predatory lenders charge you inordinately high interest rates for an overvalued product. All you have to do is walk onto a BHPH lot to know that is true. You will find high mileage vehicles, often in fair or poor condition, that are priced at least double their average retail value. During the paperwork signing phase you will find that the BHPH dealership is going to charge you a very high interest rate–often the highest allowed in your state of residence. In most cases that is around 25 percent. You will also find that you have a maximum of 30 months to repay the loan. So, you have a high interest rate, outrageous purchase price, and a short time to repay the loan. It is almost as if you are using a payday loan to buy a car!
Do Not Improve Credit Scores
BHPH dealerships prey on people with bad credit, touting that they will approve anyone, regardless of credit score or credit history. That is a true statement. What they do not tell you is that, unlike a traditional bank or auto lender, they will be doing nothing to help your credit score. They never report your loan to a credit reporting agency, because this is an additional expense. So, most likely, you will be struggling with a high payment for a few years without any real benefits! A traditional lender will report your debt to the credit agencies, so by making payments on time each month, you’ll be building a positive payment history and thereby improving your credit score.
There are many specialty lenders who deal in bad credit auto loans for nearly every credit score. These lenders offer traditional loans against new and used cars. The interest rates are lower than those at a BHPH and the repayment terms may be longer. They will also ensure that the vehicle they are loaning against is priced reasonably. In addition to all of these money saving benefits, specialty lenders report every transaction to all of the major credit reporting agencies. Every on-time payment that you make will help improve your credit score.
Let us match you up with a dealer or lender ready to accept your credit for financing–today!