Buy here, pay here lots, examined
The banners are short because the claims are true as far as they go. This piece reads each one to the end of the sentence it leaves out.
A buy here, pay here dealer sells the car and also holds the loan, so the same business decides what you pay for the vehicle and what you pay to borrow for it. For some buyers — especially people turned away elsewhere — that arrangement is what gets them to work. It is also an arrangement where the usual separation between seller and lender, and the leverage that comes from it, is absent. Practices vary a great deal from one lot to the next, and the rules that govern them vary by state. Below are the claims you tend to see painted on the windows, and what to check behind each one.
What it usually means
The lot is not relying mainly on your credit report to decide; it is relying on the car, the down payment, your income and its own ability to collect. That is a real difference, and it can open a door. But the risk hasn't gone away — it has been priced. It usually shows up somewhere: in the price of the car, in the interest rate, in the size of the down payment, or in all three. "No problem" describes getting a deal done, not the cost of it.
What it usually means
In-house financing: the contract is with the dealer (or a company tied to it), not with an outside lender. The practical upshot is that there is no second party whose own standards might push back on the price of the car. Some dealers do later sell their contracts to finance companies, so ask who you will actually be paying in month six. Whoever holds it, the federal Truth in Lending disclosure — APR, finance charge, amount financed, total of payments — should be on the contract. Reading a retail installment contract shows where to find it.
What it usually means
(The figure on this banner is ours, made up for arithmetic.) Weekly or every-two-weeks payments are common on these lots, often timed to paydays. They also make a payment look small. $95 a week is $4,940 a year — about $411.67 a month when you multiply by 52 and divide by 12, which is the only way to compare it with an ordinary monthly loan. Ask for the number of payments and the total of payments, not just the amount of one. And ask how payments are made: some lots expect them in person, online, or by automatic draft, with fees attached to some methods.
What it usually means
Speed is the product. It helps if your old car just died. It also means the inspection, the comparison with other cars, and the reading of the contract are all squeezed into one afternoon, which rarely favors the buyer. The car will generally still be there tomorrow. If the deal is only available today, that is worth weighing on its own.
What it usually means
That depends entirely on whether — and to whom — the dealer reports your payments. Some report to one or more of the major credit bureaus; some report to none, in which case years of on-time payments build nothing on your file. Some report late payments but not on-time ones. Ask which bureaus, in writing, and check your own reports a few months in to confirm. How a car lender reads your credit explains what a reported account adds.
What it usually means
Look at the Buyers Guide sticker in the window; federal rules require dealers to post one on used cars they offer for sale. It says whether the car is sold "as is" or with a warranty and, if there is one, what it covers and for how long. A dealer's own inspection is not an independent inspection. A warranty "available" may be a service contract sold separately, often folded into the loan. The FTC's guide to buying from a dealer covers the Buyers Guide in detail; some states also limit as-is sales, so check yours.
What it usually means
Before signing, find out what happens when you don't pay on time: the late fee, the grace period if any, and how quickly the dealer can repossess. Some lots install devices on their cars that can locate the vehicle or prevent it from starting when payments are late; whether and how that is allowed depends on state law and on what the contract says, so read that part closely. If the car is repossessed, you may still owe the difference between what you owed and what the car sold for. What happens if you miss a car payment walks through the general sequence.
Before you sign, get these in writing
- The cash price of the car, separate from any financing.
- The APR, the number of payments and the total of payments.
- Whether the car is as-is or under warranty, and what any add-on costs.
- Which credit bureaus, if any, receive your payment history.
- The late-payment and repossession terms, and whether a tracking or starter-interrupt device is installed.
- Permission to have your own mechanic inspect the car first.
None of this makes a buy here, pay here lot the wrong choice. For some people it's the only one on the table that week. It does make it a choice worth making slowly, with a notepad, and with the same skepticism you'd bring to any seller who also happens to be your lender. If there's any way to buy a cheaper car with cash while you rebuild, weigh that option alongside it.
Keep reading
Further reading
- Buy here, pay here dealerships Investopedia
- Auto loan tools and guides Consumer Financial Protection Bureau
- Annual percentage rate (APR) Investopedia