Car Deal Canada

Buy Here Pay Here Dealerships Explained

Buy Here Pay Here Dealerships Explained

Buy here pay here (BHPH) dealerships provide unique financing solutions for drivers with poor or no credit history. At a BHPH dealership, the dealer serves as both the seller of the vehicle and the lender providing financing directly to the buyer. This allows them to sell and finance vehicles to those who may not qualify for financing at traditional auto dealerships or banks.


BHPH dealerships focus on approving customers based on their ability to make regular payments rather than their credit scores. Approval is based more on income level and other factors. BHPH lots specialize in helping subprime borrowers or those with limited credit access get vehicles.


At a BHPH dealership, customers make payments on their vehicle loan directly to the BHPH dealer, usually weekly or bi-weekly. The dealership manages the financing in-house rather than using third-party lenders. This guide provides an in-depth look at how BHPH dealerships work, their pros and cons, tips for getting approved, and more.

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What is a BHPH Dealership?

Buy here pay here (BHPH) dealerships provide a unique financing solution for drivers with poor credit or no established credit history. Unlike traditional dealerships, BHPH lots act as both the seller and lender for vehicles purchased on their lot.

BHPH dealerships specialize in helping subprime borrowers who may not qualify for financing from banks, credit unions or other mainstream lenders. Since they handle financing in-house, BHPH dealerships can set their own approval standards based on a buyer’s income level and ability to handle weekly or bi-weekly payments.

Rather than requiring good credit scores and low debt-to-income ratios, BHPH dealers are more flexible with approvals. They make money on interest rates over time as buyers pay down their auto loan, so the focus is on the buyer’s ability to make their payments consistently.

Payments at BHPH dealerships are structured on a weekly or bi-weekly schedule. This allows the dealer to recoup payments faster while also making it easier for buyers to budget for and manage these more frequent payments. The vehicle acts as collateral on the loan, so consistent on-time payments are crucial.

 

Pros of Shopping at a BHPH Dealership

There are several advantages to shopping at a buy here pay here dealership. For many people with poor credit or no credit history, a BHPH lot may be their only chance at getting approved for an auto loan. Here are some of the biggest pros of using BHPH financing:

 

Get Approved Despite Poor Credit

The top benefit of BHPH lots is that they provide financing options to those who may not qualify through a traditional lender or bank. Because they focus on in-house lending, BHPH dealerships can approve buyers with low credit scores, bankruptcies, repossessions, and other credit challenges in their past.

 

Lower Credit Standards

Since BHPH dealers are their own finance company, they can set their own standards for credit approval. These standards are often much lower and lenient than large banks and lenders. Income, down payment, and ability to make regular payments are weighed more heavily.

 

Weekly/Bi-Weekly Payments

Most BHPH dealers structure payment plans around weekly or bi-weekly installments. Smaller, more frequent payments are easier to manage for many buyers rather than one large lump sum each month. This structure helps buyers avoid missing payments.

 

Develop Credit History

Making consistent on-time payments to a BHPH dealer can help you start establishing positive lines of credit. This will gradually improve your credit score over time. BHPH financing gives you a chance to rebuild your credit one payment at a time.

 

Wide Selection of Used Cars

BHPH lots have large inventories of used vehicles to browse on-site. You can test drive different models and find a reliable used car that fits your budget. While the selection is not as robust as larger new car dealers, there are still many options to choose from in various price ranges.

 

Cons of BHPH Dealerships

While buy here pay here dealerships provide financing options for those with poor credit, there are some downsides to be aware of before purchasing a vehicle through in-house financing:

 

High Interest Rates

Interest rates at BHPH lots are typically much higher than rates from a traditional auto loan. Expect to pay interest rates from 15% to over 30% when financing through a BHPH dealer. The higher rates account for the increased risk the dealer takes on by approving buyers with poor credit.

 

GPS Tracking Devices

Many BHPH dealers install GPS tracking devices on vehicles they finance. This allows the dealer to locate and potentially disable the vehicle if the buyer misses a payment. While it provides the dealer more security, these devices are seen by some as too invasive.

 

Higher Risk of Repossession

Since BHPH dealers are direct lenders, they can quickly repossess vehicles when payments are missed. There is less flexibility versus working with a traditional bank or lender. A few missed payments can result in repossession and make it even harder to get financing in the future.

 

Limited Selection

Inventory at BHPH dealers is typically older used vehicles under $10,000 in value. Selection is more limited compared to large new car dealerships. However, many BHPH lots have partnerships to source vehicles at auctions when needed.

 

Extra Fees

In addition to higher interest rates, BHPH dealers often charge fees like documentation fees, undercoating fees, and GPS fees. Carefully review all costs before signing a contract. Negotiate fees whenever possible.

 

How to Get Approved at a BHPH

Getting approved for financing at a buy here pay here (BHPH) dealership is different than getting a traditional auto loan. Since BHPH dealerships serve customers with poor credit or no established credit, the approval process focuses more on your ability to make regular payments rather than your credit score alone. Here are some tips for getting approved for a BHPH auto loan:

 

Have Proof of Income and ID Ready

BHPH dealers will want to see proof that you have a steady income that can support a car payment. Bring items like recent pay stubs, bank statements, tax returns, or other documents that show your income sources and amounts. Having consistent verifiable income is key. You’ll also need valid photo ID like a driver’s license or passport.

 

Calculate Your Budget

Before applying, make sure you can afford the weekly or bi-weekly payments on the vehicle you want. Calculate all your monthly expenses like rent, utilities, debt payments, etc and see how much is left for a car payment. Aim to keep the payment under 20% of your take-home pay. Know your budget and what payment amounts work for your situation.

 

Know Your Credit Score

While BHPH dealerships focus more on income than credit scores, it’s still helpful to know your score. This gives you an idea of what interest rate you may qualify for. You can get free credit reports from www.annualcreditreport.com. While your score may be low, consistent on-time payments at a BHPH lot can start improving it.

 

Ask About Down Payment

Many BHPH dealers require little or no down payment for their in-house financing. But having some money to put down shows you are committed and can lower your interest rate. Ask the dealer what, if any, down payment options they offer. Even a few hundred dollars down can improve your loan terms.

 

What to Know Before Buying from a BHPH

If you decide to purchase a vehicle from a buy here pay here dealership, there are some key things to keep in mind before signing on the dotted line:

Thoroughly inspect the vehicle: Don’t let excitement over getting approved for financing distract you from examining the vehicle closely. Take it for a lengthy test drive and have a trusted mechanic inspect it for any issues. Look for exterior damage, test all functions and electronics, and examine the interior wear and tear.

Negotiate pricing and interest rate: BHPH dealers set their own financing terms, so negotiate firmly to get the best possible deal. Aim for the lowest sale price, interest rate, and monthly payment that you can. Be prepared to walk away if you can’t get agreeable terms.

Understand all fees: Along with the vehicle purchase price, there will likely be additional fees like a documentation fee. Make sure you are aware of every fee and associated cost before signing paperwork.

Ask about GPS devices: Many BHPH dealers install GPS trackers or starter interrupt devices on vehicles in case payments are missed. Always find out if any additional technology has been installed to disable the vehicle.

 

Making Payments to a BHPH

One of the defining features of buy here pay here dealerships is their unique payment structures. Unlike traditional auto loans from banks or credit unions that allow monthly payments, BHPH dealers typically require more frequent payments.

Most BHPH dealers require weekly or bi-weekly payments that must be made in person at the dealership or via online bill pay. Payments may range from $50-$200 per week depending on the total cost of the vehicle purchase. Some dealers may allow customers to set up automatic payments from a bank account.

The reason for this type of payment schedule is that it reduces risk for the BHPH dealer. Collecting payments more frequently makes it easier to repossess the vehicle if the customer misses payments. This ensures the dealer recoups their investment in the event of non-payment.

Missing payments to a BHPH dealer can have serious consequences. The first missed or late payment will often trigger late fees, similar to a traditional auto loan. However, multiple missed payments may prompt the dealer to activate a starter interrupt device installed on the vehicle. This prevents the vehicle from starting until the missed payments are made. If payments continue to go unpaid, the dealer will likely repossess the vehicle within a matter of weeks.

While the payment terms may seem rigid, making consistent on-time payments is the best way to build credit and maintain ownership when buying from a BHPH dealer. It also paves the way for transitioning to lower interest rate auto financing in the future after establishing a solid payment history.

 

Buying vs Leasing from BHPH

When shopping at a buy here pay here (BHPH) dealership, you’ll have the option to either buy or lease a vehicle. There are pros and cons to each option that are worth considering:

 

Buying Pros:

  • You’ll build equity in the vehicle over time as you make payments
  • No mileage restrictions like a typical lease
  • Option to pay off the loan early and own the vehicle outright
  • Can sell or trade in the vehicle later

 

Buying Cons:

  • Less flexibility if your situation changes
  • Stuck with the same vehicle for entirety of the loan term
  • Responsible for selling the vehicle when you no longer need it

 

Leasing Pros:

  • Lower monthly payments than purchasing
  • Get to drive a newer vehicle more often
  • Easier to get out of the lease if your situation changes
  • Dealership responsible for selling the vehicle at lease end

 

Leasing Cons:

  • No equity – all payments go towards usage
  • Mileage limits typically apply
  • Vehicle must be returned in good condition at lease end
  • Extra fees if over mileage limit or vehicle is damaged

 

When deciding between buying and leasing, think about how long you plan to keep the vehicle, your driving needs, and budget flexibility. Buying may make more sense if you want equity and lower payments long-term. Leasing offers more convenience and flexibility. Discuss all options thoroughly with the BHPH dealer to decide what works best for your situation.

 

How to Improve Your Credit with BHPH

One of the major benefits of financing a vehicle through a buy here pay here (BHPH) dealership is the ability to establish or rebuild your credit. By making consistent on-time payments, you can steadily improve your credit score over time. Here are some tips to maximize your credit benefits when financing through a BHPH dealer:

 

Make All Payments On Time

The most important thing you can do is pay every payment by the due date. BHPH dealers report your payment history to the credit bureaus, so each on-time payment will be reflected in your credit report. Even one late payment can negatively impact your score. Set up reminders and budget accordingly so you never miss a payment deadline.

 

Pay Down Balances

In addition to making monthly payments, making extra payments to pay down your principal auto loan balance faster can improve your credit utilization ratio. The lower your balances are compared to your total available credit, the better it is for your score. Paying more than the minimum due shows lenders you can handle credit responsibility.

 

Review Credit Reports Regularly

Get a copy of your credit report from all three major credit bureaus every few months. Review the reports closely to ensure there are no errors or fraudulent activity. Also verify that your BHPH loan is being accurately reported by the dealer. Having current positive payment history from your auto loan is key to credit increases.

 

BHPH Industry Trends

The buy here pay here industry has seen some notable shifts and changes over the past decade. Understanding the current trends can help consumers make the most informed decisions when shopping at BHPH lots.

One major trend is the growth of online applications and financing platforms for BHPH dealers. In the past, customers could only apply and get approved for financing in person at the dealership. Now, many dealerships allow customers to complete the entire application process online. This makes it faster and more convenient to get pre-approved before even stepping foot on a car lot.

Increased regulations on BHPH financing have also impacted the industry. The Consumer Financial Protection Bureau and state laws have introduced new requirements around disclosure forms and limiting balloon payments. While this provides more consumer protections, it has also led some smaller BHPH dealers to go out of business.

That ties into another trend – consolidation among BHPH dealers. Large nationwide chains like DriveTime and CarHop are acquiring smaller independent lots. This gives them more scale and standardized processes. However, it reduces the number of small “mom and pop” operations. Consumers may have fewer options buying local, but larger dealers can offer a wider selection of inventory.

The BHPH industry continues evolving to meet consumer needs. But buyers should understand how these key trends impact their financing options, costs, and the overall dealership landscape.

 

Future of BHPH Dealerships

The buy here pay here industry is expected to continue evolving and growing in the coming years. Here are some predictions for the future of BHPH dealerships:

Growth in Subprime Auto Lending Market: As more consumers struggle with lower credit scores, the subprime auto lending market is projected to expand. This will drive further demand for BHPH dealerships that specialize in lending to buyers with poor credit.

Increasing Reliance on Technology: BHPH dealers will utilize more sophisticated software and data analytics to streamline operations and lending decisions. This can lead to faster loan approvals and processing for customers.

Emergence of Hybrid Online/Offline Models: Some BHPH dealers may adopt a hybrid model with both a physical dealership and online financing platform. This omnichannel approach can improve convenience and expand reach.

Greater Transparency: The industry may see a push towards more transparent pricing, fees, and lending practices. This can help improve BHPH reputation and build consumer trust.

Increased Competition from Fintech Lenders: Financial technology companies offering online loans directly to subprime borrowers may disrupt the BHPH model. Dealers will need to emphasize their advantages like personalized service.

Industry Consolidation: Economies of scale could drive mergers and acquisitions among smaller regional BHPH dealerships into larger chains and franchises.

Focus on Compliance: Tighter regulation and oversight may force BHPH dealers to focus more heavily on legal and regulatory compliance in their operations and lending.

Overall, the buy here pay here industry is positioned for further growth and evolution in tandem with the broader subprime auto lending market. BHPH dealers will need to leverage technology and transparency while competing with new digital lenders to maintain their niche serving credit-challenged car buyers.

 

Conclusion

In conclusion, buy here pay here dealerships provide a unique financing option for those with poor credit or no established credit history. The major pros of shopping at BHPH lots are getting approved for an auto loan despite credit challenges, having more flexible payment options like weekly installments, and being able to develop a credit history. However, the cons include higher interest rates, a higher risk of repossession if payments are missed, and limited vehicle selection compared to new car dealerships.

Overall, BHPH dealerships can be a good option if you need a car but are worried about getting approved for financing elsewhere. Just be sure to negotiate the best possible deal, understand all fees and payment terms, inspect any vehicle thoroughly before purchase, and make payments on time to avoid repossession. With the right research and preparation, you can get a quality used car through in-house dealer financing even with poor credit. We hope this guide gave you all the key information you need to shop smartly and successfully at buy here pay here dealerships.

 

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Questions About Buy Here Pay Here Dealerships

Buy here pay here (BHPH) dealerships are car dealerships that provide their own in-house financing to customers with poor credit or no credit. This allows people who may not qualify for financing from traditional lenders to get a vehicle by making payments directly to the BHPH dealer.



BHPH dealerships in Canada work similarly to the US. The dealer is the lender, so you make weekly or bi-weekly payments directly to the BHPH dealer until the car is paid off. Interest rates are usually quite high. The dealer will install a GPS tracker on the vehicle so they can disable it remotely if you miss payments.

The requirements tend to be more relaxed than traditional lenders. You need:

 

– Valid ID

– Proof of income

– Down payment ($500 – $1500 typical)

– References

 

They run a soft credit check but bad credit or no credit is usually fine. Bankruptcies, repossessions, and collections may still qualify in most cases.

Most BHPH dealers in Canada require weekly or bi-weekly payments. This allows them to monitor customer payments closely. Payments are usually made in cash at the dealership but sometimes pre-authorized debit is available after several months of on-time payments.

The down payment at Canadian BHPH dealerships typically ranges from $500 to $1500 for most vehicles. High-end vehicles may require more money down. The more money you put down, the lower your weekly or bi-weekly payments will be.

Interest rates are quite high, often in the range of 24-29% at most BHPH dealerships across Canada. However, for customers with poor credit or no established credit, these dealers often provide the only financing option outside of subprime lenders.

Most BHPH dealers do not report customer payment history to Equifax or TransUnion on a regular basis. However, if a default occurs and the vehicle gets repossessed, this serious delinquency will likely show up on your credit report.

Yes, getting approved with bad credit or no established credit is common at BHPH dealers. The whole premise of their financing model is to provide loans to high risk applicants unable to obtain traditional dealer and bank financing.



No. BHPH dealers understand that most customers have already been declined financing from banks and other lenders. They specialize in approvals for customers with credit challenges who have limited financing options.

Payment terms are typically 24 months or 36 months. Some dealers may allow longer terms up to 48 months for customers with good payment history. The longer the term, the lower the monthly payment amount.



Yes, most dealers allow customers to pay off the full loan balance early without penalties. This allows you to save on interest charges by paying more than the minimum payment when possible. Paying weekly instead of bi-weekly will also save interest over time.

Buy here pay here dealers in Canada stock mostly used vehicles. Models are typically 5-10 years old with higher mileage (100k km+). On rare occasions BHPH dealers may carry some new vehicles or very late model used cars.

Mileage tends to be quite high on vehicles at Canadian BHPH lots, often over 150,000 kms. Budget around $150-$250 weekly for a vehicle with approximately 200,000 kms. Lower weekly payments may be available for higher mileage vehicles.

You will receive several calls from the BHPH dealer asking you to make the payment immediately. If several consecutive payments are missed, the dealer can remotely disable your vehicle using a starter interrupt device until you become current on payments.

Yes. If you fall too far behind, the BHPH dealer will send a tow truck to repossess the vehicle. Any items left in the vehicle will not be returned to you either. Repossession will severely damage your credit as well.



You are responsible for arranging and paying for all maintenance and repairs during the payment term. The dealer is only providing financing. Make sure to get a safety certification and inquire about any existing mechanical defects beforehand.



Third party warranties can provide peace of mind but are expensive on high mileage vehicles. Most mechanical problems will occur after the term expires. Instead, ask the dealer to discount the price by the amount equal to one year’s average repairs.



In addition to taxes, expect to pay documentation/admin fees ($300-$500) and GPS tracker installation ($200-$400). There also may be wheel locking device or lien registration fees as well. Inquire about the total out-the-door price.

– How many payments until the car is paid off?

– Will my payment history be reported to credit bureaus?

– Can I make payments online or do they have to be in-person?

– Who pays for registration renewal and insurance?

– What is your breakdown/roadside assistance policy?

– What happens if the car gets into an accident or is stolen?

– Do you allow early payoff without penalty?

– Is there a warranty or service plan included?

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