Buy here pay here and Traditional dealerships
Buy here pay here (BHPH) dealerships provide in-house financing solutions to customers with poor or no credit histories who find traditional auto loans challenging to secure. They specialize in direct lending options that eliminate banks or credit unions as an external lender and make financing much simpler and faster for them.
Traditional dealerships (also referred to as franchise dealerships) are licensed retailers of specific vehicle brands. They provide both new and pre-owned models from that manufacturer they represent, including new vehicle inventory as well as service for older models.
Which is better?
Making the choice between buying from a Buy Here Pay Here (BHPH) dealership or traditional dealership depends on a number of personal considerations and factors. Let’s examine their differences:
Financing: BHPH dealerships tend to offer in-house financing, which means the purchase can be funded without using third-party lenders. This can be particularly helpful for individuals with poor or no credit histories as they may find it more difficult securing financing through traditional dealerships. On the other hand, traditional dealerships usually work with external lenders and may provide more financing options as well as competitive interest rates for those with good credit histories.
Traditional dealerships usually carry an expansive inventory of new and pre-owned cars to offer more choices in terms of make, model, features and price point; while BHPH dealerships usually only carry used cars.
Pricing: BHPH dealerships typically charge higher interest rates and prices due to taking on greater risk by financing individuals with poor credit histories, as well as additional fees or charges that they may add on top. Traditional dealerships tend to provide more cost-effective pricing, especially if an outside lender can help secure you financing at more favorable terms.
Customer Service: Customer experiences at both BHPH and traditional dealerships may differ significantly, depending on their reputations and how customer satisfaction is prioritized; in contrast, BHPH dealerships may be more flexible in their approval processes but may not provide as high a level of support or service after sales.
Credit Building: When it comes to rebuilding or establishing credit, traditional dealerships may be your best bet. Their payments typically report directly to credit bureaus, helping your score improve over time; while BHPH dealerships may not always report as frequently, limiting potential credit building benefits.
Decisions between BHPH dealerships and traditional dealerships ultimately depend on your unique circumstances, credit history, financial goals and offerings available in your region. When making any such choice, be sure to evaluate terms, conditions, pricing and reputation carefully – regardless of which dealership type it may be.
Advantages
Both “buy here pay here” (BHPH) dealerships and traditional dealerships can have distinct advantages; let’s examine them each:
Advantages of Buy Here Pay Here Dealerships:
Access to Financing: BHPH dealerships provide financing directly to buyers, making the financing more accessible for individuals with poor or no credit histories. In many instances, these dealerships may also approve loans more readily than traditional lenders for individuals who might experience difficulty in getting loans approved elsewhere.
Flexible Approval Process: BHPH dealerships often employ more relaxed approval processes compared to traditional dealerships, and may consider factors other than just credit scores when considering financing applications, including income and employment stability as a basis for approval, making financing available for more individuals.
Convenient Payment Solutions: BHPH dealerships typically offer customers convenient payment solutions, including on-site or online portal payments that allow buyers to make payments directly to them. This is ideal for individuals who prefer an easier payment experience.
Advantages of Traditional Dealerships:
Traditional dealerships generally provide buyers with a wider selection of new and used vehicles to choose from, giving more options in terms of make, model, features and price range. This allows buyers to find something suitable to their preferences and needs from such a selection.
Traditional dealerships tend to work with external lenders like banks and credit unions to offer financing solutions at more favorable interest rates and loan terms, particularly for buyers with excellent credit.
Additional Services and Support: Traditional dealerships often provide additional services and support, including vehicle maintenance, repairs and warranty programs. They may even have a dedicated customer service team available post purchase to address any customer inquiries or needs.
Potential Credit Building: Financing your vehicle at a traditional dealership and making regular payments may help to build or improve your credit score over time. They frequently report payments to credit bureaus, helping establish positive credit histories over time.
Professional Reputation: Established dealerships typically boast established brands, providing assurance about the quality of vehicles sold and customer service received. Buyers may conduct further research and analysis when considering dealerships with long histories that can demonstrate these traits.
Your decision between BHPH dealerships and traditional dealerships ultimately lies within your individual circumstances, credit history, financial goals and offerings available in your region. When making this choice it’s essential that you carefully weigh up each option, compare terms, evaluate pros and cons before making a decision.
Disadvantages
Both “buy here pay here” (BHPH) dealerships and traditional dealerships have their own set of disadvantages; let’s explore them together:
Disadvantages of Buy Here Pay Here Dealerships:
Higher Interest Rates: Because BHPH dealerships assume more risk by offering financing to buyers with poor or no credit histories, their interest rates often charge higher interest than traditional dealerships and can significantly add to the total vehicle cost.
Limited Vehicle Selection: BHPH dealerships typically carry a smaller selection of vehicles than traditional dealerships, often specialising in used cars that may have higher mileage or be older models, making it harder for buyers to locate something suitable. This may make finding one meeting your preferences and needs all the more challenging.
Strict Payment Terms: BHPH dealerships tend to offer less flexible payment terms compared to traditional dealerships, making missed or late payments potentially result in repossession, leading to even further financial strain on buyers.
Limitations in Credit Building Opportunities: While timely payments to BHPH dealerships can help build credit, not all dealerships report them to credit bureaus, meaning buyers may lose out on an opportunity to build positive credit histories through their car loan agreement.
Disadvantages of Traditional Dealerships:
Traditional Dealers Have Stricter Financing Requirements: Traditional dealerships tend to have stricter financing requirements compared to BHPH dealerships, often placing more weight on credit scores and placing greater difficulty for individuals with poor credit to secure financing at favorable interest rates.
Potential of High Pressure Sales Tactics: Traditional dealerships may use high-pressure sales tactics to force buyers into making an unwanted purchase or accepting financing terms that might not be in their best interests, leaving buyers feeling pressured into making decisions without fully comprehending their terms and conditions. This could result in buyers feeling rushed into making snap decisions without fully understanding all terms and conditions involved with purchasing their vehicle.
Traditional dealerships may charge additional fees or upsell customers on add-ons such as extended warranties, service packages or insurance that could increase the overall vehicle cost without necessarily providing added value or cost efficiency. Such add-ons could increase overall costs without necessarily offering benefits that make sense or are cost effective.
Depreciation: Vehicles purchased from traditional dealerships often experience rapid depreciation in value within their first several years, leading to significant loss if the buyer decides to sell or trade-in the vehicle later on.
Buyers must carefully weigh these disadvantages against their own financial circumstances, credit history and preferences when making their choice between BHPH dealerships and traditional dealerships. Conducting comprehensive research, comparing options and reviewing terms of any financing agreements are all vital steps toward making an informed decision.
Other dealerships
Aside from buy here pay here (BHPH) dealerships and traditional dealerships, there are other types of dealerships for cars. Here are a few examples:
Franchise Dealerships: Franchise dealerships are authorized retailers of certain car brands, offering new cars from specific manufacturers with various models, options and trim levels available for purchase. In addition, these dealerships may also sell certified pre-owned vehicles from that manufacturer as well as offer maintenance or repair services specific to that brand they represent.
Independent Used Car Dealerships: Independent used car dealerships specialize in selling pre-owned vehicles from various manufacturers, offering an array of makes, models and price points. Independent dealerships may be more flexible when it comes to pricing and negotiation than franchise dealerships.
Luxury Car Dealerships: Luxurry car dealerships specialize in high-end and luxury vehicle brands, and typically provide both new and pre-owned luxury models for sale, offering premium buying experiences with personalized services, premium facilities, and additional amenities.
Online Car Dealerships: With the rise of e-commerce, online car dealerships have grown increasingly popular. Operating exclusively online, these dealerships allow customers to view and purchase vehicles through their websites. Some online dealerships even provide home delivery options or simplified buying processes.
Auction Houses: Auction houses specialize in selling used vehicles through auctions. They frequently have cars, trucks, SUVs and commercial vehicles available to be purchased – the latter often at lower prices than what might otherwise be found. Auctions may provide the chance to find potential bargains; it is essential, however, to inspect each vehicle prior to bidding in order to identify potential risks or shortcomings in them before bidding at any auction house.
Notably, dealership availability depends on your location and size of automotive market in your area. Exploring all available dealership options can help you identify one that best meets your car-buying requirements.