• Tweet

• Tweet

When people purchase a car from a buy here, pay here dealer, they arrange vehicle financing and make car payments to the dealership. The vehicle is purchased using financing provided by the dealer, rather than a third party like a bank.

This is not the same as a second chance auto loan and some people think it is the only option for bad credit auto financing, which is not true.

Under a buy here, pay here arrangement, the car buyer makes loan payments weekly or bi-weekly to the dealership. In most cases, payment must be made in person using a check or cash. Many used and new car dealerships have begun to offer their own financing, tapping into the market of car buyers with poor credit.

When visiting this type of dealership, the financing discussion usually takes place before viewing any cars. This allows the salesperson to understand the credit situation of the buyer and show only those cars that will be affordable.

People with a FICO credit score under 640 often visit these dealerships to buy their cars and arrange financing directly.

In addition to providing credit to those with poor credit scores, these dealers are flexible with older model vehicle trade-in arrangements. They are usually able to find a buyer for the trade-in and sometimes consider the vehicle as part of the down payment for the purchased car.

When a new car dealer does not accept an old model trade-in, a buy here, pay here dealer probably will.

Disadvantages of these dealers include no way to rebuild the credit history. Buy here, pay here dealers do not usually report the loan or payments to a credit bureau. Thus, car buyers cannot improve their credit score through this bad credit auto financing.

These loans are also more likely to result in repossession, making financing alternatives like second chance auto loans more attractive.