Buy Here Pay Here Columbia, SC

Buy-here, pay-here dealerships are usually  sold as an easy alternative  for people with bad credit to own a vehicle — but they come with a cost and inconveniences that you’re unfamiliar with. Buy-here, pay-here  may sound like a lifesaver, but their high costs probably may not be worth. Let’s take a look at how they work.

How Does Buy Here Pay Here  Really Work ?

Buy-here, pay-here financing in Newark is quite different from the normal  dealership 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 cars in that price range for you to choose from. You will then pay your  installments directly to the dealership.

But, what’s wrong with this you may ask ?

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

On the surface , this financing option might seem like the best for you,  especially  if you’ve been turned down by traditional lenders before. The promise of “no credit checks, no problem” can be very enticing. But it is important to understand the true cost and implications of this type of financing before making a final decision.

Why This might not be right for you.

Old Value Cars

If you’re looking to buy a 500 down car in Columbia SC, chances are you’re getting mostly older and lower value cars. According to the 2018 study by  the National Independent Automobile Dealers Association, 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,

Buy-here, pay-here financing can be really expensive

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

A report by the National Credit Union Administration report showed that , 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.

Hidden Fees

Buy-here, pay-here dealers 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 a staggering  one-third of customers defaulted on these loans. In addition to the high interest and fees, you may end up paying way more for your car than its worth.

Your vehicle may be constantly monitored

Dealers want to be sure they are able to repossess the vehicle if you default on 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 up 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 Columbia  may be a cheaper alternative. 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.