There is no doubt that the volume of vehicles sold off of buy here pay here car lots is on the rise. In 2001, buy here pay here auto sales totaled about 1.2 million units, accounting for about 4.1% of all dealer sales. Sales 10 years later paint a very dissimilar photo of the used car market. The whole of buy here pay here, or Bhph, vehicles sold is estimated to reach nearly 2.4 million, accounting for 8.6% of all used car dealer sales - more than doubling its shop share.
This anticipated increase in the Bhph sales begs the question: what shop military are causing this change, and is it good for the American consumer?
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If you don't already know, buy here pay here car dealers differ from traditional franchise car dealerships in principal ways. The most salient unlikeness involves the way financing is carried out. A approved dealership relies on off-site, third-party finance institutions to approve financing for customers. These institutions may include automaker-affiliated finance clubs like Ford Auto Credit, national and local banks, reputation unions, and specialized auto finance companies. However, the qoute lies in getting approved. Most third-party lending institutions are loath to extend reputation to citizen with subprime or deep subprime reputation scores. This has become increasingly true while the economic stepping back our country has been experiencing. To make things more difficult for car buyers and dealers who want them approved so they can sell cars, the troubled cheaper has taken its toll on the midpoint reputation score of American borrowers. citizen have been losing their jobs, missing bill payments, and in total decreasing their reputation scores.
That said, citizen still need to buy cars and dealers need to sell them. Buy here pay here car dealerships offer financing in-house and on-site, contrary to a approved dealership. The in-house nature of this arrangement allows them greater free time to approve financing for citizen who have reputation scores below 600 to 620. This is as consuming to the dealers as it is today car buyer, as it is in the best interest of both parties to move the metal, so to speak. These in-house financing car dealers can be identified by the advertising slogans they employ, such as we finance, we tote the note, buy here pay here, and your job is your credit. Even traditionally approved dealerships have been exploring the Bhph arena, as the behalf margins are higher and they can sell cars to greater spectrum of buyers from a reputation perspective.
There is a downside, however, to buy here pay here car sales. In fact there were some downsides, including exorbitant rates of interest, high minimum down payments, well used inventory, absence of facility warranties, and frequency of payments. These are, of course, disadvantages for the buyer and not the dealer. They are largely methods of reducing the risk of granting reputation to high risk applicants on the part of the dealer.
These disadvantages make buy here pay here financing a recipe of final resort for car shoppers who cannot be proved via the traditional channels due to reputation problems, bankruptcy, foreclosure, or a article of reimbursement delinquency.
Buying Cars From Buy Here Pay Here Car Dealerships - The Risks and Rewards