Buy Here Pay Here Lancaster Ohio

Buy-here, pay-here dealerships are marketed as an easy way for people with bad credit to own a vehicle — but they come with a ton of expensive and inconvenient pitfalls.Buy-here, pay-here  may sound like a lifesaver, but their high costs probably aren’t worth it. Let’s take a look at how they work.

How Buy Here Pay Here  Financing Really Work ?

Buy-here, pay-here financing is quite different from the traditional car-buying process. Normally, when you buy a car from a traditional dealership, the dealership helps you secure a loan from a third-party lender, and if you’re approved for a car loan, you make monthly payments to the lender that finances the loan.

With buy-here, pay-here financing, the dealership acts as both the seller and the lender. They offer in-house financing and you may be asked to verify your income and proof of residence, but the dealer usually won’t check your credit.Once the dealership calculates the loan amount you qualify for, it will show you vehicles in that price range for you to choose from. You will then pay your auto installments directly to the dealership. But, what’s wrong with this you may ask ?

Is Buy-Here, Pay-Here a Good Idea?

At first glance, buy-here, pay-here financing might seem like the best option,  especially  if you’ve been turned down by traditional lenders before. The promise of “no credit, no problem” can be very enticing. But it’s important to understand the true cost and implications of this type of financing before making a decision.

Why It might not be right for you.

Old Value Cars

If you’re looking to buy a 500 down car in Lancaster , chances are you’re getting mostly older and lower value cars . In 2018, the average cost of a car on a buy-here, pay-here lot was $7,004, with an average down payment of $950, according to  industry analysis from the National Independent Automobile Dealers Association.

Buy-here, pay-here financing can be expensive

Buy-here, pay-here dealerships may not be kind with loan interest. According to a 2018 National Independent Automobile Dealers Association study, the average interest rate for this sort of loan is over 20%, which is significantly more than auto loans at most banks and credit unions.

In the third quarter of 2020, the average interest rate on a four-year, used-car loan from a bank was 5.32% and 3.24% from a credit union, according to the National Credit Union Administration report.

Hidden Fees

Buy-here, pay-here sellers may still charge extra fees which can cause you financial problems. In 2019, the National Independent Automobile Dealers Association and the National Alliance of Buy Here, Pay Here Dealers reported that over one-third of customers defaulted on these loans. In addition to the high interest and fees, you may end up paying significantly more for your car than its worth.

You may be constantly monitored

Dealers want to ensure they are able to repossess the vehicle if you fail to make your payments. Approximately 45% of buy-here, pay-here dealerships install devices that track the car or prevent it from starting, allowing the dealer to repossess the vehicle if you default on the loan.

They can come with an inconvenient payment schedule

You may have to make weekly or biweekly payments to the dealer, which may be inconvenient compared to a monthly payment plan. Also,the payment is made directly to the dealer rather than a bank, so your payment options may be limited compared to a regular auto loan.

It may not help you build credit

Some buy-here, pay-here lenders may not  report your payment history to the main consumer credit bureaus. So, even if you’re making your payments on time, you may not get the benefits of building credit.

What other options do you have ?

Don’t be fooled into thinking that a buy-here, pay-here car loan is your only option. Here are a few alternatives to consider.

Get a co-signer

Adding a co-signer to a car loan can improve approval chances for those with poor credit. You can ask a reliable friend or relative who has a good credit history and understands the risks involved. If you fail to make a payment, your co-signer is responsible for making up the difference. Missed or late payments reflect on both borrowers’ credit reports, potentially harming both of your credit.

Buy from a private Seller

Buying a used car from a private seller in Lancaster may be a cheaper option. While you’ll have to handle the paperwork and transfer of ownership yourself, you could be paying even less for the vehicle in a private sale. Just make sure you complete your homework. Getting a vehicle history report and paying for an inspection can help you avoid purchasing a lemon.