Understanding Buy Here Pay Here Car Dealerships

When you’re shopping for a car, you face a multitude of decisions. It’s not just about selecting the right vehicle; you also need to choose a lender or decide on your payment method if you’re not opting for a loan. While many assume all car dealerships are alike, there are alternatives beyond major franchises and used car lots. One such option is the buy here pay here (BHPH) car dealership, often overlooked for various reasons, but worth understanding in depth. Let’s delve into how they operate and what sets them apart.

How Does a Buy Here Pay Here Car Dealership Work?

Unlike traditional dealerships that arrange financing through banks, buy here pay here car lots handle financing in-house. This means they directly finance the vehicles they sell, making it possible to extend credit to individuals who might not qualify through conventional channels due to poor credit or limited financial history. These dealerships are recognizable by their roadside signs advertising bad-credit car loans and other financing offers. Typically, they require proof of income and may skip the credit check.

Buy here pay here dealerships determine loan amounts based on your income. Their vehicle inventory tends to consist of older cars with lower market values, averaging around $7,000 as of 2018. A down payment is usually required, and payments are made directly to the dealer, often on a weekly or flexible schedule.

Pros and Cons of Buy Here Pay Here Dealerships


  • Accessible Financing: Ideal for buyers with poor credit or lower incomes needing a reliable vehicle.
  • Quick Approval: Avoids the lengthy approval process of traditional loans.
  • Flexible Payment Options: Some dealerships offer weekly payments or other flexible plans.


  • Higher Costs: Interest rates are significantly higher than traditional loans, averaging around 20% in recent studies.
  • Financial Risks: Higher rates of default among buyers can lead to repossession and added fees.
  • Limited Credit Reporting: Not all dealers report payments to credit bureaus, limiting potential credit score improvements.

Alternatives to Consider

If the drawbacks of buy here pay here dealerships give you pause, there are alternatives worth exploring:

  • Cash Purchase: Paying in full avoids loan costs altogether, though it may not build credit history.
  • Private Seller: Buying directly from an individual seller can save on dealer fees, though it requires careful inspection and handling of paperwork.
  • Traditional Auto Loans: Shop around for lenders who specialize in loans for buyers with less-than-perfect credit, offering potentially lower rates than BHPH dealerships.
  • Co-Signer Option: Enlist a co-signer with better credit to secure a traditional loan, but be mindful of the shared financial responsibilities.


While buy here pay here dealerships offer a straightforward path to vehicle ownership for some, they come with significant financial considerations and risks. It’s crucial to approach any car purchase—whether through a BHPH dealership or otherwise—with thorough research and awareness of all costs involved. By exploring alternative financing options and understanding the terms of your purchase, you can make a more informed decision that suits your financial situation and transportation needs effectively.

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