A whole host of myths endure in the world. Not all of those myths are of the Loch Ness variety. Quite a few misguided ideas hang over the heads of auto dealers. Buy Here Pay Here (BHPH) dealers absolutely have to deal with prominent myths that impact customer behavior. Maybe it is time to really start addressing these false notions.
Who Are BHPH Dealers?
Buy Here Pay Here dealers finance cars without a third-party lender. In other words, a person looking to purchase a car can borrow from the dealer. Financial institutions such as banks and credit unions may choose not to lend to a particular borrower due to credit woes. A BHPH dealer simply extends credit, which is to say the seller creates a loan for the buyer.
Although this type of lending has been around for more than 40 years, people still prescribe to a few myths:
Myth #1 – BHPH dealers won’t work with people who have no credit history.
No dealer is going to turn down anyone who wants to purchase a car – particular not someone who has great credit! Many people, unfortunately, fall under neither category. They do not have good or bad credit – they have no credit history. BHPH dealers are absolutely willing to work with people who lack a credit history.
In order to target a niche of customers, a dealership may stress “bad credit borrowers” accepted. This does not mean ONLY those with bad credit can buy an auto. The advertising campaigns may create a bit of confusion in this regard.
Myth #2 – BHPH cars are “junkers” and only “ugly duckling” cars are available.
As is the case with all myths, a bit of truth may be present. Not all used cars are perfect and they are priced accordingly. Used car lots, however, must sell a wide variety of cars in order to reach as many customers as possible. And they have to lend money to as many people as possible in order to facilitate sales. What does this mean? All manner of cars – including many in great condition – are available for sale and financing.
Myth #3 – The loans come with the highest possible interest rates.
Myths are sometimes based on a little bit of truth. Bad credit borrowers are a risk. Their troubled credit history necessitates higher APR’s. However, each and every borrower’s credit history and rating is going to be taken into account. That means the interest rate offered may be high, but still far from the highest possible amount possible. Individual credit histories define the eventual interest rate amount. The interest rates are going to be reasonable based on the borrower’s history.
Myth #4 – There is lax regulation on the BHPH dealerships
Nothing could be further from the truth. Businesses have to follow along with state and federal regulations. Those who are involved with lending and extending credit positively must adhere to a host of regulations on the books. These regulations are not just a statute here and there in a dusty book. The regulations are wide and sweeping. They also include a number of different agencies. So, no one in the BHPH world is going to get away with fast ones.
Myth #5 – The full amount of the car must be financed.
This myth infers the dealer wants to maximize the loan to maximize the interest. Such is not the case. Down payments are absolutely accepted and only the remaining balance on the vehicle needs to be financed. The goal of a car dealership is to sell a car and not to get involved with overly convoluted lending programs. If someone only wants to finance 60% of the vehicle’s cost, so be it.
Myth #6 – BHPH dealers love to repossess cars so they can resell them time and time again.
This is one of the more absurd myths. For one, there are costs associated with repossessing a vehicle. All those costs get deducted from the profit margin of the vehicle. The repossessing and collection agency has to be paid. The car has to be advertised again. And so on. Plus, the vehicle depreciates with more age, mileage, and wear and tear. Buying and reselling the same car makes no fiscal sense.
What About Carfect?
Carfect is one of the top companies for buying used cars – and that is no myth! Even troubled borrowers with bad credit can be approved without any hassles. Our inventory is home to all sorts of makes and models. Check out what’s new at our website.