A Buy Here Pay Here (BHPH) car dealership is one that finances your purchase directly. You don’t need to go to an outside bank or other financial institution; the dealer’s own financing programs are available. Flexible payment arrangements mean you can own a vehicle and benefit from low monthly, bi-weekly, or weekly payments that fit your budget.
This is not a new business plan, but it is still fraught with myths. Here is a breakdown of six of them to help you break free of common misconceptions.
Myth #1: High Interest Rates
There are rumors of rates up to 30%. While some dealers charge the maximum allowable rate, the average BHPH dealer has an APR of around 20%. Some set rates much less than that. Like any business, it exists to profit, but success isn’t always measured in dollars. The dealership wants a steady flow of customers too. But always expect some interest to be paid because the dealer is lending its own money.
Myth #2: Large Down Payments
The down payment does not have to cover most of the car’s cost. This may have been true in the 1950s but is no longer true in the automotive industry. Wholesale vehicle prices have risen dramatically. Therefore, the average customer could not afford this arrangement. The dealer offsets the risk of charge-offs by collecting interest, but doesn’t typically profit from it, and will work with the buyer to build their down payment until they can come up with the money.
Myth #3: Undependable Warranty
It’s often said that warranties come with a high deductible, so it’s difficult to have repairs and breakdowns covered. Some even say a BHPH warranty is rare. However, dealers realize if their car stops running, customers may stop paying them. Hawthorne Auto Square offers a limited warranty to cover the cost of repairs; all our cars are covered for 30-days or 1,000 miles.
Myth #4: Huge Repercussions for Late Payments
Being late on a payment can lead to high late fees, repossessions, and a termination of contract. But the same is true with any bank or finance company. A BHPH may likewise give you a grace period after which a late fee will apply. If your dealer works with customers with limited economic means, they may not charge late fees; check with your contract to learn more about how your dealer handles late payments.
Myth #5: Turn and Burn Car
The practice of churning applies only to a limited number of dealers. It involves repossessing cars quickly and then reselling them many times a year. Any dealer would have difficulty selling the same car five times in a year’s time, let alone sustain its reputation. Most understand working with each customer to help them pay off their loan principal is the best business model.
Myth #6: Unregulated
In fact, there are many regulations pertaining to the BHPH industry. These used car dealers must comply with the State & Federal Unfair & Deceptive Practices Laws, The Truth in Lending Act, and many others. Dealers often report your payment history to credit bureaus. There are also industry organizations such as the National Independent Automobile Dealer Association and National Alliance of Buy Here Pay Here Dealerships working to overcome the uncertainty consumers often have.
Visit Hawthorne Auto Square Today
At Hawthorne Auto Square, we work with you all the way. If you’ve been turned down for a loan, we can get you approved and make a sale, so you can have the car you want. We also work with you to find a finance plan. Take time to build your down payment and get approved no matter how you get paid. To learn more about our programs, inventory, and cost of vehicles for sale, call 866-707-7664 or visit our dealership today.