In house financing car dealers a.k.a. buy here pay here (BHPH) provides auto loans for consumers who do not have the capacity to purchase an automobile in full and/or in cash. Often, they also have bad credit and trouble qualifying for a regular car loan.
For the majority of automobile purchasers, buying a car means taking out an auto loan. There are of course several types of auto loans such as bank or lender financed, and we will explain the in house financing model below.
In House Financing Defined
The term “in house” is indicative of the fact that the loan agreement is entered into between the automobile dealer and the automobile purchaser directly with each other. In other words there is no third party or other entity such as a bank or a lender that comes in with another contract or additional terms and conditions. This is usually via the financing department of the automobile dealer.
Of course this is without prejudice to the fact that car dealerships may have their own arrangement with a bank or lender to be able to afford in house financing or the purchaser may have another arrangement with a bank or lender to afford the down payment. What is important is that with regards to the actual purchase contract, it is only the automobile dealer and the purchaser that are signatories.
The Why and Why Not of In House Financing Car Dealers
Let’s start with the advantages. This includes but is not limited to:
The purchaser is only required to submit one set of application documents and one set of required documentation. Consumers with middling to poor credit ratings have a high chance of getting auto loan approval. Car buyers do not need to depend on an outside party lender who usually will have more stringent conditions in granting loan approvals.
This is especially helpful to those who actually need an automobile to go to and from work, but can’t qualify for a regular auto loan. The purchaser may even request a trade in arrangement to offset the purchase price or down payment.
On the other hand some experts and consumers alike argue that the following disadvantage may offset the advantages:
Yes, they accept bad credit financing but the interest rates are way above standard and usually just below usurious. In fact, in California, there are now discussions to cap the interest rates charged on BHPH financing.
Some dealers only offer financing to “unfavorable” models that have bad reviews, performance, mileage durability, etc.
This type of financing also requires stricter terms, and calls for higher penalties. For example, some dealers will not accept even payments that are a day late. They will proceed with repossessing the car.
To learn more about the ins and outs of in house financing car deals, check out this buy here pay here car lots article.
In Closing …
Due diligence is the name of the game! If you want to get the best in house financing car dealers then you need to take your pick from dozens of dealers. Start your search via the internet then narrow it down. Visit the actual office of your top picks and request pre-approval quotes. Consider offers from more than one dealer and pay on time and in full.