Buy here pay here loans are advertised as a simple solution for those with poor credit to qualify for finance, but they have several costly and inconvenience-causing pitfalls. Before you look for buy here pay here , let’s take a moment to think about a few aspects of this financing concept.
Financing through a buy-here pay-here store may be pricey
The interest you’d pay on loan could not be negotiable at buy-here, pay-here dealerships. Additionally, you might be charged additional costs by buy-here, pay-here merchants. Unfortunately, these high prices may lead to financial difficulties: the National Alliance of Buy Here Pay Here Dealers released a survey that found that more than one in three borrowers had defaulted on a buy-here loan.
In addition to paying a lot in interest and fees, you might overpay for your car. The loan amount is typically capped by traditional lenders based on the vehicle’s value. However, buy-here, pay-here dealerships might not impose such restrictions, so you might be forced to borrow more money than the car is worth. As soon as you drive off the lot, you might be in default on your loan as a result.
A lender that offers buy-here, pay-here may put in a tracking device
If you stop making payments, dealers want to ensure they can immediately reclaim the vehicle. To help them reclaim the car if they default on the loan, most buy-here, pay-here sellers install gadgets that track the automobile or stop it from starting. For you, giving up a certain amount of privacy may be impossible.
A buy here pay here loan may have a problematic payment schedule
In contrast to a monthly payment schedule, you can be required to make weekly or biweekly payments to the dealer. Additionally, since the dealer receives the compensation directly rather than from a bank, your options for doing so may be more restricted than with a conventional auto loan.