To give you some background the primary focus of the Buy-Here Pay-Here car dealer is to sell and finance vehicles for people that have bad credit and are unable to buy and finance automobiles through traditional dealers and lenders. They do this by selling used vehicles and financing them in-house or through the selling dealer. They don't use banks, finance companies or third party lenders. Their customers buy the car and make the weekly payments at the same place, hence Buy Here Pay Here.
Setting-Up the Buy Here Pay Here Car Dealership
Some BHPH car dealerships are small corner lots that set up business in and old gas station or an auto repair facility as long as they have an office, a couple of bays where they can work on or prepare cars for sale on the lot and an area where they can display their vehicles that are for sale. On the other end of the spectrum you will find that some new car dealers set-up a Buy Here Pay Here division in addition to their regular car sales business to accommodate customers that will not qualify for an auto loan through their normal lenders. So you can see that BHPH car dealers can come in all shapes and sizes.
Inventory for the BHPH Car Dealership
The small to mid-size BHPH car dealer is always on the lookout for vehicles to sell on their lot. They go to auctions to buy cars, buy cars from private party sellers and they also buy cars from new car dealers that were trade-ins. They are very particular about the cars they buy because they have to pay cash and they need dozens of cars to stock their lot and attract customers with a good selection.
The new car dealers that have a Buy Here Pay Here Department usually sell their quality trade-ins in their BHPH Division. It makes good sense to sell their trades with in-house financing because they have a steady source of used vehicles at their disposal and they can avoid buying cars from the auction which is a very time intensive activity to find quality cars.
No matter where they get their vehicles they are very careful to make sure they only offer sound and dependable automobiles because they will be financing their customer's purchases. If they were to sell junkers and beaters to their customer they stand a chance of the buyers not making their payments. Then if the customers don't pay they will have to repossess the cars and then they are stuck with vehicles that are unsellable because they are junk. So you can see why they are very particular about the cars that they sell and finance at their Buy-Here Pay-Here car dealership.
The Process at the Buy Here Pay Here Car Dealer
The first step of the car buying process at the buy here pay here auto dealer is to see if the buyer can qualify for in house financing. Some dealers pull the consumers credit report and some don't, one of the main concerns is the income and the stability of that income of the buyer along with where they live. The BHPH car lot owner is looking for a person that has an income that can service the auto loan weekly or biweekly and how long they have been on their job. These aspects are often more important than prior repossessions or bankruptcies.
Once they qualify for in house financing they discuss terms of the auto loan including the down payment, number of payments, the interest rate and when and where the car payments are to be made along with the form of payment which could be cash or checking account debit. The price is important, but the customer is usually more concerned with the payment.
Vehicle Selection at Buy Here Pay Here Lots
Then it is time for the customer to select a vehicle from the dealer's lot. They are given a list of the vehicles that they are qualified to buy and finance and they choose their vehicle of choice. Yes, that is different from your traditional car dealer, but things are done differently at the buy here pay here auto dealer. Some people say that the car is overpriced, but you need to remember that the BHPH dealer is about to finance a customer with very bad credit and a small down payment.
The Buy Here Pay Here dealer is playing the odds and hoping the buyer will make the payments as agreed, but a certain percent of all the sales will have to be repossessed after the buyer has run the car into the ground. The car buyer with bad credit knows that they will be paying a high price for the car and an interest rate that is high to compensate the dealer for the high risk and the expenses they will have to absorb when they repossess vehicles.
Buy Here Pay Here Car Dealer Paperwork and Conditions
Preparing and signing the paperwork is done in the dealer's office which is a contract between the buyer and the dealer. The documents are all legal and conform to regulations that are set by the state when the car is being purchased and financed. The terms and conditions are set by the dealer and the buyer must conform to all those conditions or they are violating a legal agreement. The last thing you want to do is be late with your payment because the car can be repossessed the following day. Grace periods for late payments are rare and the BHPH car dealer is within their rights to seize the vehicle one day after the payment is late. You might say there is a zero tolerance policy when it comes to enforcing the terms and conditions of the contract between dealer and buyer.
BHPH Auto Dealer Bad Deals, Repos and Mistakes
Even the best run dealers are certain to make bad deals, mistakes and have to repossess vehicles. They are careful to do everything they can to avoid problems, but it still happens. If they have to repossess a car they have to hire a recovery firm which can cost several hundred dollars and then they need to do something with the car. Very often the car has been in an accident or been run hard and put away wet which makes the car worthless and ready for the scrap yard. It is very rare that a repossessed car comes back in good shape. The Buy Here Pay Here Car Dealers takes it on the chin and loses money, but hopefully learns a lesson when it comes to qualifying buyers.
