How Does Buy Here Pay Here Car Financing Work in Topeka?
Buy Here Pay Here financing is a term that you’ve probably heard of recently if you’re in the market for a used vehicle in Topeka. Buy Here Pay Here financing promises a low down payment on a used car without any of the hassles of credit checks or bank financing.
What Is Wrong with Traditional Used Car Financing?
At its most basic level, Buy Here Pay Here financing is a simplification of the financing model that has plagued the auto industry for decades. It has “disrupted” the industry, allowing for more players, more competition, and better services for used car buyers.
Let’s consider how you used to buy a car in Topeka. Savvy buyers realize that new cars for sale in Topeka come with a price premium, so they buy from a traditional used car dealership. But the dealership only sells cars — it doesn’t offer financing for these cars. Financing is up to you to find while the dealership waits patiently for their payday.
You know you need to buy a car, but you don’t know how much you can borrow. So you browse the used car lots near you, unsure of what you can afford. You must make a trip to the bank or lending organization you hope you can borrow from.
There are hundreds of lenders, all supposedly offering you the best deal. Most people will consider their own bank first. But with a used vehicle purchase, the bank is wary. They want to know you’re not going to buy a lemon, or they’ll be in negative equity should you default on the loan. So they want you to detail in your application the car that you’re planning on buying. You don’t know which car though, because you don’t know which one you can afford!
Banks really don’t want the hassle of reclaiming a car and trying to sell it on if you’re unable to repay the loan. They’re banks — they make their money from loans by simply having money and lending it to people with an added interest rate. Having to deal with repossessions and selling real property isn’t fun for a bank, so they’ve added a number of tests to ensure you’re the type of person that won’t default on the loan.
First, a bank will want to know the details of your salary and your spending. They will have a formula to decide how much leeway you have in your budget for a car repayment. They will also want to know about any credit arrangements you already have, such as credit cards, student loans, personal loans, mortgages, etc. They will be considering whether these creditors will get preferential treatment should you go bankrupt.
All traditional lenders also rely on third-party reporting on borrowers’ credit. Three credit reporting bureaus run the credit system in the U.S. — Equifax, Experian, and TransUnion. If you have not used credit much in the past or you’ve had problems in the past with credit, your credit score will be low. With a low credit score, the bank will usually turn you away for a loan. As somewhat a kick in the teeth, just applying for a loan will often result in your credit score dropping.
Why Is Buy Here Pay Here Car Financing in Topeka a Better Option?
Dealerships became annoyed at banks and lenders turning away potential customers for loans even when these people had good jobs and clearly had the ability to repay a loan. In times of recession, this problem became more acute, as banks closed up shop and used car dealerships in Kansas and Missouri struggled to clear the vehicles on their lots.
For those that could afford to do so, the used car dealerships began to lend the money to buyers themselves. This allowed them greater autonomy and they could decide to whom to lend.
Buy Here Pay Here financing doesn’t necessarily mean the dealership won’t run a credit check, it just signifies that the dealership will be handling all of the financing and repayments. However, many Buy Here Pay Here dealerships decided to specialize in offering used car financing to those who were finding it harder to get a car loan through traditional means.
For example, Auto Now in Topeka foregoes a credit check and instead uses your current monthly income as a gauge of how much you’re able to borrow. As long as you have a stable job that nets you $1,200 a month, you’ll be offered a loan (you’ll also need to be over 18 and have a driver’s license).
Though Buy Here Pay Here financing began as a way to offer car loans to those with poor credit, it quickly became obvious that this mode of used car financing was better for the customer. Now a customer can come into a dealership or browse its website, be advised how much they will be allowed to borrow based on their income, test-drive vehicles, drive away in their new car, and make repayments all at the same location.
Because Buy Here Pay Here lowers some of the usual operating costs for a dealership, the overall price of vehicles and the cost of interest can be lower. Buy Here Pay Here financing is highly competitive for those who have poor credit scores.
How Are Repayments Made with Buy Here Pay Here Financing?
Repayments are made on Buy Here Pay Here financing in a similar way to how you’d repay a car loan from a bank. Versatile Buy Here Pay Here used car dealerships in Topeka offer you a range of options for repaying your loan. You can make repayments in person or online. You can pay using your credit card, or make a direct transfer from your bank. If you want to ensure your repayment is always made on time, you can have the amount automatically taken from your bank account or credit card on a specific date.
Now that Buy Here Pay Here has become the top choice for buyers, the banks may have to rethink their approach to used car financing.
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