BadCreditAutomotive.com is dedicated to providing reliable information about how to buy a car with bad credit. That is a responsibility in itself, which on occasion requires me (the webmaster) to make statements that go against the grain of traditional thinking. Traditional thinking says that when someone has had a bankruptcy, repossession, credit card charge offs or other credit problems (disasters in some cases), that they have no other choice than to resort to shopping buy here pay here car lots.

THAT IS NOT TRUE!

If you don’t believe me, then check this page. If you would like to continue reading about why you should avoid buy here pay here car lots at all costs, then hold on to your seatbelt… I’m going to unload on some little known facts about the buy here pay here industry.

Why Avoid Buy Here Pay Here Car Lots?

They Buy Low and Sell High.

Generally speaking, buy here pay here dealerships are smaller used car stores that buy inexpensive vehicles and resell at a premium price. “Premium” being the choice word in that sentence because it is usually higher than “retail”. There is in fact, not a more expensive way of purchasing a vehicle.

The “Disappearing” Down Payment.

If you’ve shopped at any buy here pay here car lots and asked about down payments, there usually is a different down payment for every car, even if the price is the same. Why? This is because the down payment amount is based on what the dealer paid for the vehicle. If they paid $2,000.00 for it, they usually require $1,000.00 or more down. In many cases, the down payment equals the amount that they paid for the car, with remaining payments being pure profit.

Not only are the down payments usually a good portion of their cost for the vehicle, after the down payment is made you still drive off owing more on the car than it’s full retail price. So the down payment is “disappearing” in that it was pointless. If you were to buy the same vehicle from a normal car dealership or private seller, you would most likely save on the sale price more than the amount of the down payment paid to a buy here pay here dealer.

Predatory Sale Prices

“You’re not just buying a car, you’re buying credit.”, said a salesman at a local buy here pay here lot. This is the mentality that many in the industry have. People are coming to them because they think they can’t get financed anywhere else and are at the mercy of the car lot. A $2,500.00 car becomes a $5,000.00 car when customers are only focused on payments. What are you going to do, negotiate? They’re doing you a favor by even approving you, right? Not at all.

Predatory Lending Practices

Payday loans fall into the same category as buy here pay here car lots when it comes to the amount you have to pay back vs the original “loan” amount. Expect to pay interest rates higher than most major credit card companies charge. You’re payments may be low, as they’ll usually finance a car much longer than a real loan company would, but most of the money you would be paying goes to interest for the first half of the loan. Usually there is a state cap on interest rates charged by dealers that offer in-house financing. When the length of the loan is extended to give you “low payments”, you still pay more than what is reasonable for finance charges.

For example… a $5,000.00 “loan” after a $1,000.00 down payment can result in a total loan payback as high as $10,000.00. All of that for a vehicle that could have been bought for $2500.00 to $3,000.00 from a private seller or normal car dealership.

All Sales are “As Is, Where Is”

Drive off the lot in a 5 year old vehicle with 100,000 miles and expect them to be responsible for the transmission failing in a week? Forget it. They already have your down payment and would be better off if they repossessed the vehicle from you to resell. Depending on the down payment you paid, they’ve probably already recovered their cost, anyway. Unless you get one gem of a deal, all vehicles sold are “as is”, meaning that you accept the vehicle “as it is” and what breaks down once you hit the street is your responsibility.

Ignorance is Profit for Buy Here Pay Here.

So many people that have been turned down by traditional lenders think they have no other option. This causes people to get into situations that prevent them from ever getting ahead. If one wants to get a real car loan with a low credit score, bankruptcy, past repossessions or other credit problems, applying with the appropriate type of sub-prime lender is a life saver. Don’t expect the salesmen at buy here pay here car lots to let you in on the possibility of you being approved for a better deal.

That’s not their job.

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