Any credit is good credit car dealerships
There are some dealerships who advertise 'Any credit is good credit.' These dealerships are also called 'Buy here pay here,' dealerships or BHPH for short.
These BHPH dealerships are usually able to offer this type of opened credit with anyone who has a steady history of employment. With this type of dealership, your credit, good, bad and worse does not come into the equation.
At these BHPH dealerships, it is the dealership who gives the credit to the consumer – not the finance company. As these car dealerships don't check your credit rating, they also rarely report your payment history to the credit reporting agencies either. This is both good and bad. If you mess up your payments with them, it won't hurt your credit rating any further. By the same standard, if you need to build up your credit rating, as these BHPH dealerships don't report your good payment history with them, then your credit rating is not going to improve through this loan. If your goal is to improve your credit rating, then try to get an auto loan from another source.
The advantage of these used car dealerships is that it can often be the only option for some low-income and poor credit customers. The downside is that these buyers may be hit having to pay more interest than a good credit buyer who is getting their Dealer_Financing from a traditional lender. Keep in mind, that if your credit is less than pristine then you will pay a higher interest rate at these traditional lenders anyway. These dealerships fill a necessary gap for many consumers.
How they work...
These BHPH dealerships buy vehicles that are less-than-perfect from various auctions and new-car dealerships. They then recondition these cars and resell them on their own lot. Usually, but not always, a large down payment is required.
Some of the dealerships also offer leasing plans – some even offer 0% financing. If you manage to finish all payments for your purchase, then at the end of the contract, the title is transferred over to your. This is the same for any traditional financial lender contract.
The reason for the larger down payment is that it usually the amount to cover the initial cost of the car. Then the financed amount contributes to the dealer's overhead and profit. Say for example, the vehicle is bought by the dealership for $1500 initially. They put in another $600 for all the necessary mechanical repairs to bring the vehicle up to snuff and to make it look good. Now the dealer puts the vehicle out for sale with a sign saying, "$1500 down, $120 per month."
One of the unique aspects of these dealerships is that they will often require you to bring your paycheck to them every pay period. The dealer takes the payment and returns the balance of the paycheck to the buyer. The term for these loans is usually 24 months. Statistically, over half of these buyers default on their loans. Some of the issues are that they can't afford to keep up the repairs, maintenance and insurance that is necessary to keep the cars on the road. This means the dealers end up having to repossess many of their sales.
If you do choose to go this route, then be sure to have an independent mechanic take a look at your choice. It's always better to be safe than to be sorry.
With today's economy, the need for these dealerships has grown proportionally. As more dealerships pop up giving a buyer several different dealerships to shop around between. This competitive market gives you a chance to get better rates and may end up with something only slightly higher than traditional lenders.
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