7 Buy Here Pay Here Myths

A Buy Here Pay Here (BHPH) car dealership is a type of auto dealer that finances your vehicle purchase directly. Instead of going to a credit union, bank, or other financial institution, the dealer has in-house financing programs available for car buyers. By offering flexible payment arrangements, you can own a new-to-you vehicle and reap the benefits of having low monthly, bi-weekly, or weekly payments that work with your budget. 

If you live in the Los Angeles, CA area, you may be familiar with buy here, pay here dealerships like Hawthorne Auto Square. However, there are many myths about these dealerships. Read on for seven of the most common myths about these types of dealerships so you know the truth. 

Myth #1: High Interest Rates

One of the most common myths about these types of dealerships is that you’ll end up with high-interest car loans with rates up to a whopping 30%. Yes, some dealerships may charge the maximum rate allowed under the law, but the average BHPH dealership has an annual percentage rate (APR) of around 20%, with some setting rates even lower.

Every business aims to make a profit, but a successful dealership doesn’t always measure everything in revenue dollars alone. A trustworthy car dealership wants loyal, repeat customers who recommend them to others. As a car buyer, you should always expect to pay some interest because the dealership is lending you its own money. However, the interest rate won’t be as high as you might expect.

Myth #2: Large Down Payments

Many car dealerships expect customers to make some form of down payment to secure both new and used car financing. As wholesale vehicle prices have risen dramatically, most customers can’t afford to make large down payments on their purchases. You might assume that buy here, pay here dealerships expect you to plunk down a sizable chunk of your hard-earned money to purchase a vehicle. The truth is that most BHPH dealerships are happy to work with buyers and will assist you with flexible down payment options.

Myth #3: Undependable Warranty

Another myth about BHPH dealerships is that your vehicle won’t have a reliable warranty. Many car warranties include a high deductible, making it difficult for consumers to have the cash they need to pay for various repairs. This often leads consumers to believe these dealerships are scams that take advantage of people. 

However, Hawthorne Auto Square proudly offers our customers a six-month comprehensive warranty on every vehicle we sell, giving you peace of mind with your purchase.

Myth #4: Huge Repercussions for Late Payments

Making a late car payment can lead to paying high late fees and facing possible vehicle repossession. Recurring late payments can also terminate your contract. However, this is true whether you get auto financing from a bank or a BHPH dealership. Most BHPH dealerships are more likely to give you a grace period and apply a late fee rather than repossess your vehicle. Always read the fine print in your purchase contract to understand the repercussions of making a late payment for your specific situation.

Myth #5: They Only Sell Turn and Burn Cars

Selling “turn and burn” cars is the practice of repossessing cars as quickly as possible and then reselling them to new buyers. This practice, also called churning, can happen multiple times in one year, but fortunately, it only applies to a very limited number of dealerships. Most dealerships would have a tough time selling the exact same car five times in a year, and it would undoubtedly hurt its reputation.

Still, some people believe that all BHPH cars are low-quality. Our dealership in Hawthorne, CA, has a vast selection of quality, low-mileage vehicles from 2006 or newer in a wide range of desirable makes and models at affordable prices.

Myth #6: These Dealerships are Unregulated

BHPHs are seen as car dealerships for people with bad credit, so you might assume they don’t have to follow state and federal regulations and guidelines. However, these used car dealers must comply with Unfair & Deceptive Practices Laws, The Truth in Lending Act, and many others. Some of them report your payment history to the three main credit bureaus. Several industry organizations, such as the National Independent Automobile Dealer Association and the National Alliance of Buy Here Pay Here Dealerships, are working to ease the uncertainty consumers often have about BHPH dealerships. When the dealership reports your timely payments to the credit bureaus, it helps you build a positive credit score and a good credit history to increase your buying power in the future.

Myth #7: BHPHs are Only For People with Bad Credit

Getting financing from a bank or other financial institution can be difficult if you have bad credit. Although BHPHs focus on easy approval with in-house financing, you can apply regardless of your income source or credit history.

Hawthorne Auto Square offers unique programs for customers with various types of income, including SSI, government assistance, and disability. However, that doesn’t mean we only offer “bad credit car loans.” If you have an excellent credit score, we still encourage you to visit our dealership.

Visit Hawthorne Auto Square Today

The team at Hawthorne Auto Square is here to help you find the right vehicle. If you’ve been turned down for an auto loan in the past, we’ll work with you to get approved and find a financing plan, so you drive away with the car you want. To learn more about our programs, inventory, and the price of our vehicles, contact us or visit our dealership today.

Frequently Asked Questions

Is Buy Here Pay Here financing really a last resort option?

Most financing from buy here pay here dealerships provides consumers with easy, no-credit-check car loans, so they’re often considered a last resort for certain buyers. However, this financing still allows people with bad, low, or no credit to obtain the vehicle they need. This makes BHPHs a great choice for those who have difficulty getting a car through other means.

Are there any alternatives to Buy Here Pay Here financing?

Subprime auto loans typically have a higher interest rate, and they’re usually offered to customers with low credit. However, there are alternatives to BHPH financing, including getting a personal loan from a bank or credit union. You can also look for used cars locally sold online through various venues like Facebook Marketplace or newspaper classifieds if you have enough money to pay for a vehicle in cash.