Understanding Your Finance Options: Buy Here Pay Here vs. Traditional Car Financing

 A woman is shown holding up a car key while standing next to a silver vehicle. 

Shopping for a vehicle is exciting for most people. Still, that excitement can quickly turn into stress when you realize your credit score isn’t high enough to secure a traditional automotive loan. Improving your score is a new priority, but it can take years of consistency to move the dial. Fortunately, you don’t have to wait and can work with a buy here pay here dealership to finance your purchase and, ideally, rebuild your credit with each monthly car payment.


But how does a buy here, pay here dealership work? How is it different from a traditional automotive loan? As a buy here, pay here dealership dedicated to working with all types of credit, we’re here to answer your questions and set you up for success with your next vehicle. Let’s dive into the basics so you’re one step closer to finding the perfect car, truck, or SUV at a great price that fits your budget.


Your Credit Score and Its Impact on Financing Your Next Car


Your credit score is a three-digit number that reflects your creditworthiness or how likely you are to repay a loan. It plays a significant factor throughout your life because it determines how easy or difficult it is to finance major purchases, like your next vehicle or a home. But how is it determined?


The three major credit bureaus–Experian, Equifax, and TransUnion–determine your score based on several factors, each carrying a different weight. For example, your payment history carries the most weight, accounting for around 35% of your score. Next, the amount of debt you have accounts for approximately 30%, followed by the length of your credit history at 15%, a mix of revolving and installment credit at 10%, and new credit inquiries at 10%. Numerous credit inquiries can negatively impact your score, but so can a limited credit history or not having a balance of installment (automotive loan/mortgage) and revolving (credit card) credit.


Why is it important to understand these factors? It gives you a foundation to rebuild on. Knowing that your payment history has the most impact on your score reflects the importance of making your monthly loan payments on time and explains why finding the right buy here pay here dealership can help with this critical step.

 A green piggy bank is shown on the center console of a vehicle. 

Buy Here, Pay Here vs. a Traditional Automotive Loan


Financial trouble can affect anyone, from an unexpected bankruptcy after a divorce to a failed business, bad investments, or youthful irresponsibility. These issues negatively impact your credit score, making it difficult to secure a traditional automotive loan at a dealership. Why is this the case? Why don’t all dealerships offer financing to everyone regardless of credit score?


Traditional Dealership Financing


The traditional dealership experience begins with shopping for the perfect model, taking a few test drives, and negotiating a fair price. Then, once you’re ready to say “yes,” you work with a finance expert to determine the best purchase option. For most, that means securing an automotive loan with a lender, i.e. a bank, a credit union, or another financial institution.


As you navigate the finance process, the dealership relies on a third-party lender to approve the loan. The lender evaluates your credit score, determining your creditworthiness and the risk associated with approving the loan. For example, the higher your credit score, the less risky the loan; therefore, the lower the interest rate the lender charges for borrowing the money.


Dealerships typically work with numerous lenders, which is beneficial if you have a high credit score because lenders often compete to get the loan by offering better interest rates. Once approved for the loan, the dealership will walk you through the details, like your total monthly payment. From there, your monthly car payments go to the lender, who holds the title to your vehicle until the loan is satisfied. You have the duration of your loan to repay the debt, with the option of satisfying the loan earlier without repercussions.


Buy Here, Pay Here Financing


Buy here, pay here dealerships like ours operate differently. We recognize financial setbacks can affect everyone, but we don’t believe that you should suffer or lower your expectations when it’s time to purchase your next car, truck, or SUV. Instead, we’re committed to helping you break the cycle of bad credit by eliminating the middleman and financing your purchase ourselves.


While most dealerships rely on third-party lenders, a buy here, pay here dealership does everything in-house. How is this advantageous? Your credit score plays a significant role in your approval odds with a third-party lender and a traditional automotive loan. However, your credit score doesn’t carry as much weight with a buy here, pay here dealership. The dealership sets its approval standards, often working with all types of credit without hesitation.


One caveat to securing a loan with a buy here, pay here dealership is that you’ll typically pay a higher interest rate or additional fees. The higher interest rate mitigates the risk the dealership takes with approving the loan, which is expected with a lower credit score or a buyer without an established credit history. However, a traditional lender wouldn’t approve the low credit score, making the higher interest rate far better than being turned away for a loan and left without reliable transportation.

 A salesman is shown shaking hands with a customer after discussing buy here pay here financing. 

What to Look for in a Buy Here, Pay Here Dealership


A cycle of bad credit is often challenging to break because you need to secure a loan to prove you can make the payments on time and build your credit history. However, that’s almost impossible if you can’t find a lender willing to take the risk and approve a loan. The issue is exacerbated when you need a reliable vehicle to get to work, which ensures you can earn a steady paycheck to repay your debt. Fortunately, a buy here, pay here dealership can help you break the cycle.


Buy here, pay here dealerships are often easy to recognize because they openly advertise their willingness to work with all types of credit. However, not all buy here, pay here dealerships operate the same. For example, some buy here, pay here dealerships don’t report your loan payments to the major credit bureaus, which does nothing to improve your credit score and leaves you stuck in the same cycle.


Fortunately, our dealership is committed to helping customers get the most out of their purchase without compromise. We work with all types of credit and do everything possible to ensure your car, truck, or SUV sets you up for financial success. By reporting your payments to the credit bureaus, we ensure your purchase helps you break the cycle of bad credit, especially when you make your payments on time throughout the duration of the loan. You’re not only establishing your ability to manage your debt with your on-time payments, but you’re also building your credit history.


Buy Here, Pay Here, and Never Compromise


Learning that you don’t qualify for a traditional automotive loan can be discouraging, especially if you’ve found the perfect vehicle. However, that doesn’t mean all hope is lost. A buy here, pay here dealership like ours is ready to help put you on the road to financial success without adding to the stress of the car-buying process or forcing you to compromise on your automotive needs. By keeping financing in-house, we lessen the impact of your credit score and deliver personalized financing solutions that ensure the cycle of bad credit stops at our front door.