Difference Between Buy Here Pay Here Car Lots and Traditional Bad Credit Loans for Used Vehicles
When you are looking to finance a vehicle, it is wise to know the options that you have out there. Many lenders advertise great buying incentives but give the best deals to those customers with good credit. These lenders leave out the large number of customers with less than perfect credit to fend for themselves. However, there are some lenders that dedicate their business to customers with bad credit or no credit at all. Some of these lenders offer more traditional bad credit car loans while others use Buy Here Pay Here financing.
They are similar in that they help customers by giving them second chances but they are different in how they do just that. There is the application and the approval process, and the actual financing part, and the payment options.
Tuesday, May 30th 2017
Similarities and Differences in The Financing Process:
Traditional bad credit car loans:
Traditionally, customers are welcomed into the car dealerships with wide smiles and great service. Then the customers walk around the dealership to choose the vehicle they want. They are then allowed to inspect and test drive the vehicle that they chose. Once the customers fall in love with a vehicle, they sit down with a financial representative to discuss pricing and credit scores among other things. Based on the credit scores and the customers’ credit reports, a multitude of select third party lenders can approve or reject to give financing. If an approval is given from any of the third-party lenders, then the details of the interest rates and contract terms are negotiated. The payments are paid monthly and the customers send their payments every time to the third party lenders. The actual used cars Chicago dealership that the customers buy their vehicles from has nothing to do with the loan later on and if the payments are late, the outside lenders are the ones to talk to. However, if the customers were denied financing, then the customers have to walk out the car lots empty handed and feeling like they wasted their time for nothing.
Buy Here Pay Here car lots financing:
With BHPH financing, the process is reversed. Yes it usually means that you do not select which vehicle you want first, but you won’t waste your time on testing vehicles that you are not qualified for. Here is why: instead of testing vehicles and then getting the approval, the used car dealerships using the online application can approve the customers based on their financial situation first. They assess the customers’ income and major expenses like mortgage, rent, or other large payments. If they see that adding a car payment is financially doable then they approve those customers for that specific loan amount that would allow them to make the car payments. So every customer is given a specific loan amount and based on that loan limit, they are welcome to try vehicles that cost in that range. They are told which vehicles are within their loan budget and hence they try vehicles that are within that approved loan limit. These pay here buy here car lots do not need the customers’ credit scores to approve them. All credit scores are welcomed. This way more people are approved and many customers feel satisfied that they are given their guaranteed pre-approval before they select any specific vehicle. In addition, many car shoppers prefer to use the Buy Here Pay Here financing option because they deal with the Buy Here Pay Here dealership directly all throughout the term of the loan. The payments are made directly to the dealership each time. Keep in mind that through the in house financing programs of the Buy Here Pay Here used car dealerships, the payments can be monthly, bi-weekly, or weekly. This is all based on the financial assessments of the customers and what the dealerships deem necessary to help the customers make their payment on time.
Many dealerships run incentives such as zero-down offers but to qualify, customers using the Buy Here Pay Here car lots need to be under their loan budget limit that they were pre-approved for.