What Are Buy Here Pay Here Auto Loans?
Have you heard about Buy Here Pay Here auto loans? A significant percentage of people in Wichita now purchase a new vehicle with a low down payment through this method because it offers a number of advantages.
What Is the History of Buy Here Pay Here Auto Loans?
Essentially, banks were not lending enough money to average working people for them to be able to buy a car because the country was recovering from a recession (sound familiar?)
Used car dealerships needed to find a new way to help people make this important purchase or risk going out of business themselves. People needed a vehicle to work, but few had the cash lying around to just purchase a vehicle outright, especially one that would be dependable, professional, and stand the test of time.
What used car dealerships in Wichita and across the country began to do was to offer loans directly to customers themselves. The dealerships in Wichita created their own related finance companies (RFC) that could then approve the loan for the customer.
Do Buy Here Pay Here Car Loans Require Bigger Down Payments?
If you took out a Buy Here Pay Here auto loan in Wichita back in the 1970s, 1980s, or 1990s, you’ll probably remember that they needed to put down a larger down payment than a car loan from a bank.
Nowadays, there are hundreds of outside lending institutions that have entered the market and this has driven down the average down payment. All of this competition has been great for the consumer, as Wichita Buy Here Pay Here dealerships have only become more and more competitive.
Are Buy Here Pay Here Loans Regulated?
Yes, the RFC companies behind Buy Here Pay Here loans are regulated, though they have different regulations than banks. The particular regulations on a Buy Here Pay Here dealership depend on the state. States typically include regulations on:
- The amount of late fees that can be levied
- The maximum interest rate that can be added onto the loan
- The number of months you must be afforded if you fall behind on a loan repayment before the vehicle is possessed.
- Some Buy Here Pay Here loan companies have grown so big that they are considered FDIC-insured Industrial Banks.
Are Buy Here Pay Here Loans Easier to Get?
Yes, Buy Here Pay Here loans are, on average, easier to get than a loan from a bank. The bigger the bank, the less leeway they give to their customers. After the financial crash of 2008 and the long recession, banks have been extremely wary about lending money to customers. It’s almost two times harder to get a loan than it used to be a decade ago, and this doesn’t look set to change.
When you go to a bank to try to get an auto loan, they look at a number of factors. The most important thing they’ll consider is your credit score, a score determined by external companies that’s based on how you’ve handled credit in the past.
The thing is, most people who are looking to take out a loan for a modest vehicle don’t have a great credit score. They may have missed a payment here or there in the past. Even if they haven’t missed any payments, the banks are so strict now that they’ll only consider lending to those who have used a lot of credit in the past and shown they’ve been able to pay it back. This means it’s increasingly hard to get on the ladder and there’s quite a divide between rich and poor.
Buy Here Pay Here dealerships and their corresponding RFCs can set their own rules and don’t need to follow a strict script on who to lend to and who not to lend to. In fact, they’re generally more interested in lending to people with relatively poor credit because people with fantastic credit will just go to their banks or pay for a vehicle with cash.
Many Buy Here Pay Here auto dealerships, like Auto Now, don’t care about your credit rating. Why should they care about your past dealings with credit when you can show you’ve got the ability to repay a loan in the future?
Typically, you need:
- A take-home pay of $1200 or more.
- A valid driver’s license.
- Be over 18.
Are Buy Here Pay Here Loans More Expensive?
A Buy Here Pay Here loan is often the only choice for those without great credit to get a vehicle loan. Whether a Buy Here Pay Here loan is more expensive for you depends on whether you already have a great credit score.
If you have a great credit score, a Buy Here Pay Here might be more expensive than a loan from your bank, as the Buy Here Pay Here dealership will need to charge a higher rate of interest to cover the cost of facilitating the loan and to cover the perceived risk that you might default on the loan.
If you’ve had credit issues in the past, a Buy Here Pay Here loan is likely to be comparable to the interest rates a bank would offer you if they were willing to lend to you (and mostly, they won’t be!)
Are Buy Here Pay Here Loans Faster to Get?
Yes, Buy Here Pay Here Loans have a major benefit in that you’re getting the loan and buying the car all from the same place. This makes life a lot simpler as you’re not rushing around trying to find a loan and juggling this with choosing a car.