Joseph Barsic, Author December 6, 2019
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- Did you just Google Buy Here Pay Here Near Me?
- Why Sell to Someone Who May Not Pay?
- How Will This Affect My Credit Score?
- I Bought a Car From Them, What Can I do?
- Alternatives to Buy Here, Pay Here Scams
- Final Note
Auto Lenders manipulate already vulnerable people into crushing amounts of debt. So-called buy here pay here near me dealers are the biggest offenders, these act as both the seller and bank, by offering their own financing programs. While this route may seem tempting at first, there are many cons to consider.
Although it is hard to find a car with a bad credit score, it is possible. Many people, unfortunately, turn to buy here pay here near me dealers, especially after being deceived by their marketing strategies. You may recognize them from their sleazy appearance off busy main streets with signs reading “no credit checks!” or “everyone is approved.” Unlike traditional dealers, they offer their own financing for cars on the lot. In the industry, these are known as “subprime” loans, given to “subprime” borrowers. These are high-risk borrowers that are likely to default on their car payment with a credit score below 619.
The average interest rate for a buy here pay here loan is 19% and can be as high as 29%2. It’s truly expensive to be poor in America. Interestingly, as of 2016, 25% of all auto loans are of the high risk, subprime, category. The average default rate for these loans is about 1 in 3. Because the default rate is so high, many economists believe there is an auto loan bubble, similar to the housing bubble that was an important cause of the 2007–2009 recession in the United States.
As you may not know, the CFPB is hunting down these predatory lenders like Drive Time who was fined $8,000,000 for its predatory lending practices. Another great resource about the criminals that run these Buy Here Pay Here auto dealers was written by the LA Times. This article will open your eyes and keep you from making a horrible mistake.
[/rad_page_widget][/rad_page_container][/rad_page_section] [rad_page_section id=’rpsPYS6PQ39XYEQXAO1CND6O1O65D1EJJNJ’ section_name=’Section’ v_padding=” classes=” visibility=’None’ background_opts=” background_color=” background_image=” background_position=” background_cover=” background_repeat=” background_attachment=” background_gradient_dir=” start_gr=” end_gr=’#eeeeee’ video_url=” border_top_width=’0′ border_top_color=” border_top_type=” border_bottom_width=’0′ border_bottom_color=” border_bottom_type=” ][rad_page_container id=’rpcRVNXUV0VUGHGLBCDV6CRKQL4HC8XKQQ6′ layout=’full’ first=’true’ last=’true’ top=’true’ classes=” visibility=’None’ float=’left’ background_opts=” background_color=” background_opacity=” background_image=” background_position=” background_cover=” background_repeat=” background_attachment=” background_gradient_dir=” start_gr=” end_gr=’#eeeeee’ border_top_width=’0′ border_top_color=” border_top_type=” border_bottom_width=’0′ border_bottom_color=” border_bottom_type=” ][rad_page_widget id=’rpwL23XJ72RQFRB20B2EP5BOK9PYA7F6P4U’ type=’rad_text_widget’ last=’true’ top=’true’ type=’rad_text_widget’ text_title=’Why Sell to Someone Who May Not Pay?’ text_subtitle=’ ‘ rich_key=’text_data’ col_alignment=’left’ visibility=’none’ delay=” clear_float=’no’ icon=” icon_margin=’5′ icon_alignment=’left’ icon_animation=’none’ title_color=’#fc8905′ subtitle_color=” text_color=” title_size=’30’ title_w=” subtitle_size=” subtitle_w=” text_size=” cb_margin=” ct_margin=” tt_margin=’-30′ st_margin=” tet_margin=” rich_key=’text_data’ type=’rad_text_widget’ id=’rpwL23XJ72RQFRB20B2EP5BOK9PYA7F6P4U’ ]Well, my curious friend, it’s because that way, they can get away with charging way more than the car is worth via interest. Let’s say you purchase a 2004 Toyota Camry from one of these buy here pay here near me dealers. I get it, you were seduced by the low monthly sticker price of $187.47 for 48 months. Your loan is likely to be sold to a third party bank (they will take responsibility for repossessing your car in case you default.) Because most buy here pay here near me dealers don’t have a lot of capital, it’s a way to gain cash flow quickly and wring their hands of any responsibility in the event you can’t make your payment.
Two of the biggest offenders are Westlake Bank and Santander Bank. They’re criminals. Remember that “low” monthly payment of $187.47? The total you will pay for the life of that loan: $8,999.The Kelley Blue Book value for that car is $4,273. That’s $4,726 in interest alone. If around the 2-year mark, for example, your car (that did not come with any warranty mind you) experiences engine problems, are you going to want to continue that car payment? Most likely not. Your car gets repo’d. You’re out $4,499, and a car, your job in jeopardy. A catastrophe. In other words, I can guarantee you will get overcharged for a crappy car, given a predatory loan, and will very likely end up defaulting and lose everything you’ve paid into the loan, and you better believe they will take the car back.
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It’s important to note that even if you default on your payment, the lender will still make their money back in two key ways. They’ll send your loan to collections, which will severely, negatively affect your credit score. A repo will cause a 100 point drop or more and will stay on your credit report for 7 years – this is the only time this kind of loan reports to your credit. After which, they will repossess your car with very little care of any of your personal belongings, including your baby. Yes, you read that right; while researching for this article, I found at least 3 documented cases of cars getting repo’d with children in the backseat. After all that, they will sell your newly possessed car to another person who is none the wiser. They will repeat this process for the same vehicle over, and over again. The house always wins. If you didn’t think it could get worse, many of these lenders outfit these cars with a device that beeps over and over again when your monthly payment is due. This device also has the capability of locking the doors and making it impossible to start the engine.
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- Refinance your auto loan. It’s critical to refinance your vehicle, this will lower your interest rate significantly. I’d recommend going to your local credit union and see what you qualify for. Credit Unions are not-for-profit banks that typically offer lower loan rates and are more likely open to lending to those with a bad credit score.
- Sell the car on your own. You can try selling your car on your own. But, if you’re upside-down on the loan – meaning you owe more than you can get for the car, you’ll have to find a way to come up with the difference.
- Consider voluntary surrender. Exactly how it sounds. If you’ve defaulted, consider surrendering the car. A repossession can be an emotional experience because the company the lender hires can show up at your home or work at any time and take your vehicle without letting you know beforehand. Unfortunately, this still affects your credit score the same as a repo.
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- Consider improving your credit score so you may qualify for a traditional car loan. Again, I highly recommend you speak with someone at your local credit union. They typically offer lower loan rates and are more likely open to lending to those with a bad credit score.
- Find a co-signer, a co-signer acts as a backup in case you default. Please remember that your co-signer will be equally responsible for paying off the loan, and the loan will show up on both of your credit reports, so make every effort to pay on time.
- Find an online dealer or what are called “second-chance” auto lenders. These types of dealers help people with bad credit get financing by checking your income, expenses, and employment history over credit score.
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Although buying a car with a bad credit score, or no credit score at all is hard, it is doable. It just takes a little research and making an informed decision. And although it may seem like the world is on your shoulders, some organizations exist to help.
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