The Truth About Buy Here Pay Here Dealerships

Buy Here Pay Here (BHPH) dealerships advertise "guaranteed approval" and "no credit check" financing, making them attractive to people with bad credit or no credit history. But before you sign on the dotted line, you need to understand exactly what you're getting into.

This guide reveals the truth about BHPH dealerships—the good, the bad, and the alternatives that might serve you better.

What is a Buy Here Pay Here Dealership?

Unlike traditional dealerships that arrange financing through banks or credit unions, BHPH dealerships provide the financing themselves. They sell you the car and collect your payments directly.

How it works:

1. You choose a vehicle from their lot
2. They approve you for financing (usually everyone gets approved)
3. You make payments directly to the dealership (often weekly or bi-weekly)
4. The dealership retains ownership until the loan is paid off

The appeal: No banks involved, minimal credit checks, and nearly guaranteed approval regardless of credit history.

The Pros of Buy Here Pay Here

Let's start with the legitimate advantages:

1. Easy Approval

BHPH dealerships approve almost everyone. If you have:

• Very bad credit (under 500)
• Recent bankruptcy or repossession
• No credit history at all
• Been denied by traditional lenders

You'll likely get approved at a BHPH dealership.

2. Fast Process

Because there's no third-party lender involved, the approval process is quick—often same-day.

3. Builds Payment History

Some BHPH dealerships report your payments to credit bureaus, which can help rebuild your credit. However, many don't report, so this benefit isn't guaranteed.

4. Flexible Payment Schedules

Many BHPH dealerships offer weekly or bi-weekly payment options, which can be easier to manage than monthly payments if you're paid weekly.

5. No Bank Rejection

If traditional lenders have rejected you, BHPH might be your only option to get a vehicle.

The Cons of Buy Here Pay Here

Now for the significant disadvantages:

1. Extremely High Interest Rates

This is the biggest problem. BHPH interest rates are typically 18-29% APR, sometimes higher.

Comparison:

• Prime auto loan: 5-8% APR
• Subprime auto loan: 10-18% APR
• BHPH loan: 18-29% APR

Example: A $12,000 vehicle at 24% APR for 48 months:

• Monthly payment: $378
• Total paid: $18,144
• Total interest: $6,144

You'll pay 50% more than the vehicle's worth in interest alone.

2. Overpriced Vehicles

BHPH dealerships often price vehicles 20-40% above market value.

Example:

• Market value: $10,000
• BHPH price: $13,000
• After financing at 24% for 48 months: $19,500 total paid

You're paying nearly double what the car is worth.

3. Lower Quality Vehicles

BHPH lots typically stock older, high-mileage vehicles with questionable maintenance histories. These cars are more likely to need expensive repairs.

Common issues:

• Vehicles over 10 years old
• Mileage over 150,000-200,000 km
• Minimal or no warranty
• Previous accident damage
• Deferred maintenance

4. Limited or No Warranty

Most BHPH vehicles are sold "as-is" with no warranty. If the car breaks down the day after you buy it, you're still responsible for payments.

5. GPS Tracking and Kill Switches

Many BHPH dealerships install GPS trackers and engine kill switches on their vehicles.

Why: If you miss a payment, they can locate and disable your vehicle remotely, making repossession easier.

Privacy concern: The dealership knows where you are at all times.

6. Aggressive Repossession

BHPH dealerships are notorious for quick repossession. Miss one payment, and they may repo your car immediately.

Traditional lenders: Typically don't repo until you're 60-90 days behind

BHPH dealers: May repo after just one missed payment

7. No Credit Building (Often)

Many BHPH dealerships don't report payments to credit bureaus, meaning you get none of the credit-building benefits of an auto loan.

Why they don't report: Reporting requires membership in credit bureau programs and administrative work. Many BHPH dealers skip this to save money.

8. You Don't Own the Car

With BHPH financing, the dealership retains ownership until you've paid off the loan. You're essentially renting with an option to own.

Implications:

• They can repo more easily
• You can't sell or trade the vehicle without their permission
• You have less legal protection

9. Difficult to Refinance

Because BHPH loans aren't reported to credit bureaus and the vehicles are often overpriced, refinancing is nearly impossible.

You're stuck with the terrible terms for the entire loan.

10. Hidden Fees

BHPH contracts often include:

• High documentation fees
• Processing fees
• GPS tracking fees
• Late payment fees (often $50-100)
• Repossession fees

Read the contract carefully before signing.

Who Should Consider Buy Here Pay Here?

BHPH isn't right for most people, but there are situations where it might be your only option:

You've Been Denied Everywhere Else

If traditional lenders and subprime specialists have all rejected you, BHPH might be your last resort.

You Need a Car Immediately for Employment

If you need a vehicle to get to work and have no other options, BHPH can provide immediate transportation.

You Have a Plan to Pay Off Quickly

If you can pay off the loan in 12-18 months, the high interest rate matters less. The sooner you pay it off, the less interest you pay.

You're Rebuilding After Bankruptcy

If you're in active bankruptcy and need a vehicle, BHPH might be your only option (with trustee approval).

Better Alternatives to Buy Here Pay Here

Before resorting to BHPH, explore these alternatives:

1. Subprime Auto Loan Specialists

Companies like Canada Auto Approval work with bad credit customers but offer:

• Lower interest rates (10-18% vs. 18-29%)
• Better quality vehicles
• Traditional financing (you own the car)
• Credit bureau reporting (builds your credit)
• More consumer protections

This is almost always a better option than BHPH.

2. Credit Union Financing

Credit unions often have more flexible lending criteria than banks and offer better rates than BHPH.

Requirements:

• Membership (often easy to obtain)
• Proof of income
• Reasonable debt-to-income ratio

3. Co-Signer

If you have a family member with good credit willing to co-sign, you can qualify for traditional financing with much better terms.

Important: The co-signer is equally responsible for the loan. Don't put them at risk unless you're confident you can make payments.

4. Save for a Larger Down Payment

A larger down payment (20-30%) can help you qualify for traditional financing even with bad credit.

Benefits:

• Lower monthly payments
• Better interest rates
• Easier approval

Timeline: If you can wait 3-6 months to save, you'll save thousands in the long run.

5. Buy a Cheaper Car with Cash

If you can save $3,000-5,000, buy a reliable used car with cash instead of financing through BHPH.

Recommended vehicles in this range:

• Honda Civic (2005-2010)
• Toyota Corolla (2005-2010)
• Mazda3 (2006-2010)
• Ford Focus (2008-2011)

Yes, they'll be older and have higher mileage, but you'll own them outright with no interest.

6. Public Transportation + Ride Sharing

If possible, use public transportation and ride-sharing services while you save for a down payment or improve your credit.

Cost comparison:

• BHPH: $300-400/month + insurance + gas + maintenance = $600-800/month
• Public transit + occasional Uber: $200-300/month

In 6 months, you could save $2,400-3,000 for a cash car or down payment.

If You Must Use Buy Here Pay Here

If BHPH is truly your only option, protect yourself:

1. Shop Multiple BHPH Dealerships

Rates and terms vary. Get quotes from at least 3 dealerships and compare.

2. Negotiate the Vehicle Price

BHPH prices are often negotiable. Research the vehicle's market value and negotiate down.

3. Get a Pre-Purchase Inspection

Pay a mechanic $100-150 to inspect the vehicle before buying. This can save you thousands in repair costs.

4. Read the Contract Carefully

Understand:

• Total amount financed
• Interest rate
• Payment schedule
• Late payment fees
• Repossession terms
• GPS tracking and kill switch policies

5. Confirm Credit Bureau Reporting

Ask if they report to credit bureaus. If they don't, you're paying high rates without the credit-building benefit.

6. Make Payments on Time

BHPH dealers repo quickly. Set up reminders and never miss a payment.

7. Pay Off Early If Possible

The sooner you pay off the loan, the less interest you pay. Make extra payments whenever possible.

8. Plan Your Exit Strategy

As soon as you can (12-18 months), refinance with a traditional lender or save to pay off the loan.

Red Flags to Avoid

Walk away if the BHPH dealership:

• Refuses to let you get a pre-purchase inspection
• Won't provide a vehicle history report
• Pressures you to sign immediately
• Won't explain the contract terms clearly
• Has terrible online reviews
• Requires you to buy expensive add-ons
• Won't disclose the interest rate upfront
• Has a history of predatory practices

Real-Life Example: The True Cost of BHPH

Meet James:

• Credit score: 520
• Needed a car for work
• Went to a BHPH dealership

The deal:

• 2012 Honda Civic with 180,000 km
• Market value: $8,000
• BHPH price: $12,000
• Interest rate: 24% APR
• Term: 48 months
• Monthly payment: $378

Total cost: $18,144

What happened:

• Month 6: Transmission failed ($2,500 repair)
• Month 12: Missed one payment due to repair costs
• Month 13: Car repossessed
• Lost: $4,536 in payments + $2,500 in repairs = $7,036
• Still owes: $10,000+ (repo fees, remaining balance)
• Credit: Repossession on credit report for 7 years

Alternative scenario with subprime specialist:

• Same vehicle, better condition
• Price: $9,000
• Interest rate: 14% APR
• Term: 48 months
• Monthly payment: $246
• Total cost: $11,808

Savings: $6,336 + better vehicle + credit building

The Bottom Line

Buy Here Pay Here dealerships serve a purpose for people with very limited options, but they should be a last resort. The combination of high interest rates, overpriced vehicles, and aggressive repossession practices makes BHPH a poor financial choice for most people.

Before considering BHPH:

1. Try subprime auto loan specialists
2. Apply at credit unions
3. Look for a co-signer
4. Save for a larger down payment
5. Consider buying a cheaper car with cash

If you must use BHPH:

• Shop multiple dealerships
• Get a pre-purchase inspection
• Read the contract carefully
• Plan to pay off as quickly as possible

A Better Option

At Canada Auto Approval, we specialize in helping people with bad credit get approved for traditional auto financing—without the predatory practices of BHPH dealerships.

What we offer:

• Interest rates 10-18% (vs. BHPH's 18-29%)
• Quality vehicles at fair market prices
• Traditional financing (you own the car)
• Credit bureau reporting (builds your credit)
• No GPS tracking or kill switches
• Consumer protection and fair treatment

We approve customers with:

• Bad credit (scores as low as 400-500)
• Bankruptcy or consumer proposals
• Repossessions
• No credit history

Get pre-approved in just 3 minutes with no impact to your credit score. Let us show you there's a better way than Buy Here Pay Here.