Bad Credit? You Don’t HAVE to Buy from a BHPH Dealer

If you are visiting this site, then you probably think that the only way you can get a new car is through a Buy Here Pay Here car dealer. This may be due to bankruptcy, foreclosure, or just plain bad credit. But remember that there are many lenders who specialize in working with people whose credit is classified as “subprime.”

At Buy Here ‘N Pay Here, our network of lenders and dealerships does not just include BHPH locations. When you apply via our website, we will endeavor to match your application to the very best type of lender considering a complex multitude of contributing factors. You may THINK that only Buy Here Pay Here car dealerships will take your business, but that is often NOT the case. We can often match you to a lender or dealership which will offer you better rates on your auto loan than you would get from a straight BHPH dealer. Moreover, such a non-BHPH lender is more likely to allow you to rebuild your credit.

Huntington Bancshares Increases Auto Finance Market Share

Based in Ohio, Huntington Bancshares Incorporated is a regional bank holding company that provides dealer financing in the following states:

  • Ohio
  • Indiana
  • Kentucky
  • Michigan
  • Pennsylvania

Last year, Auto Finance News awarded the company an Auto Finance Excellence Award, and the company has been #1 in customer service among bank lenders, and within the top 10 for auto lenders and in house financing companies overall. Since 2009, Huntington’s market share in the states in which they operated has grown twice as large.

BHPH Vehicle Recovery: GPS Tracking vs Ignition Interrupt Devices

There has been some confusion of late about the similarities and differences between the GPS tracking devices and ignition “kill-switches” utilized by some buy here pay here dealerships. GPS tracking software is installed by some dealers to aid them if an owner defaults on his or her payments, and the vehicle in question must be recovered. The GPS tracking unit can notify auto recovery agents of the location of the vehicle so that they can more easily repossess it.

Some of these GPS technologies also come with ignition interrupt options. However, it is at the dealership’s sole discretion to decide whether to activate this feature or not. It is important to note that these types of ignition relays cannot shut down a car which is already running. Many buyers have expressed alarm, thinking that their vehicle’s ignition could be killed while the car was in operation. That is not the case. Additionally, many of these systems come with payment warning alarms.

If you make your payments, of course, you would never have to deal with any of these features. Importantly, it is the law in most states that buy here pay here car dealerships must use a disclosure statement at time of sale to notify the buyer that an ignition interrupt system has been installed. At this time, this is not the case for GPS tracking.

Discounts on Auto Loans for Green Cars

The EPA (Environmental Protection Agency) has partnered with a First Tech, an Oregon-based credit union, to offer credit applicants a 0.25% APR rate discount when the finance a “green car.” To qualify as a green car, the vehicle must have less than 100K miles, and be SmartWay-certified. SmartWay is the EPA’s program which lists more than 1500 environmentally-friendly vehicles. Although hybrid and electric cars are certainly on this list, there are also cars which may be more common on in-house financing car lots, such as those which are highly fuel-efficient or have low emissions. Basically, the list of qualifying vehicles is much longer than you might initially expect.

Unfortunately, this credit union only has branches in the Pacific Northwest. That said, this promotion might lead the way for future green car discounts. When you consider the $7500 federal tax credit available on most green cars, the savings you can get from “going green” seem to really be stacking up.

The Effect of Deflation on Car Buyers

Deflation is already having a deleterious effect on the housing market, and industry analysts have been quick to project what kind of ramifications we can expect to see on the automotive market. For the average US car buyer, the impact will be double-edged. Consumers can expect to find themselves:

  • Less Creditworthy
  • More Vehicle Savings

On the one hand, deflation makes a person’s assets worth less, and yet their amount of debt remains constant — in this way, the burden of their debt can become greater under deflation. Consumers with greater debt are seen as less worthy of credit, meaning they will have a harder time getting approved for credit. More drivers will flock could be expected to flock toward buy here pay here car dealerships.

On the other hand, deflation is allowing consumers to save money on car purchases. According to Edmunds.com, if you account for inflation adjustments since 2002, the average American car buyer is now saving about $1500 on each vehicle they purchase compared to 8 years ago.  So although we, as consumers, have less purchasing power than before, the required financial outlay for automobile purchases has declined on the whole.

How to Identify an In-House Financing Car Dealer

We talk a lot about Buy Here Pay Here dealerships on this site, but the question wasn’t recently raised by one of our customers:  how can I tell if a car dealership offers in-house financing without having to call them or visit in person?

This is one of those deceptively simple questions that we have rarely thought to answer. But it’s a good one. After all, who of us wants to have to call every dealer in town to find out if they offer buy here pay here financing or not? None of us. So let’s look at how you can tell if a car lot in question extends in-house financing. The primary way to identify these dealers is through the marketing language they use in any number of channels, such as:

  • Radio
  • TV
  • Newspaper
  • Web
  • On-site

In all of these cases, a dealership which offers financing in-house will say things in their advertisements such as:

  • Buy Here and Pay Here!
  • We Finance!
  • We Tote the Note!
  • Your Job is Your Credit!
  • No Credit Checks!

Rarely do these dealerships actually use the term in-house financing. It’s much more common for them to use the aforementioned marketing slogans, or close variations thereof.

Cash in Deal (CID): Seeing BHPH Sales from the Dealer Side

The key to success for any BHPH dealership is adhering to their CID, or “Cash in Deal.” CID refers to the dealers risk or exposure in any sale. Basically, if a customer defaults on the very first payment, this is how much the dealer stands to lose. The formula for calculating Cash in Deal is as follows:

CID = ACV + reconditioning + warranty cost (optional) + tax and fees – down payment

Once you understand this figure as a customer, you have a much clearer window into how to negotiate with your dealer. Many Buy Here Pay Here car dealerships don’t require down payments. However, many of them dictate the amount of down payment required by a customer based on CID. For instance, a higher down payment could bring the CID of a vehicle down to an acceptable level for the dealer. Car dealers who begin a history of not sticking to their Cash in Deal can easily run themselves out of business. Read the following article for more information on Cash in Deal.

Percentage of US Populace at Each Credit Tier

This table shows the percentage of American who fall into each given range of credit score. To qualify for the best auto loan rates possible, you typically need a credit score of 720 at minimum. Offers such as 0% auto financing may require even higher credit scores, and a very good debt-to-income ratio. Scores below 620 are regarded as “bad credit.” As you can tell from the chart below, easily more than 25% of the population falls into this category. These consumers are much more likely to need Buy Here Pay Here financing to get into the drivers seat of a new car, truck, or SUV.

  • 800 – 850: 18%
  • 750 – 800: 19%
  • 700 – 750: 16%
  • 650 – 700: 12%
  • 600 – 650: 9%
  • 550 – 600: 10%
  • 500 – 550: 9%
  • Below 500: 7%

Funny BHPH TV Commercial

This is a funny TV commercial featuring Rev Rob of Apple Auto Sales, a Buy Here Pay Here dealership in Charlotte, NC. Rev Rob, a former zone manager with Ford Motor Company, now urges customers to “stick it to the man,” and get approved for financing despite bad credit.

Cast

  • Grandma: Rick Little
  • The Man: Jason Lawrence
  • Bruiser Bro #1: Mario Santoro
  • Bruiser Bro #2: Gary Earle

Baby Boomer Bankruptcies on the Rise

The Administrative Office of the US Courts recently conducted a study which found that the percentage of bankruptcies filed by middle-aged Americans rose 61% in the five year period between 2002 and 2007.  By 2007, Americans born between 1946 and 1964 accounted for 42% of all filers. 

Average Age of Bankruptcy Filers

No surprise, the median age of bankruptees increased from 41 years old in 2002 to nearly 45 in 2007.  Compare this to less than 38 years of age for average bankruptcy filer back in 1994.  The only piece of good news?  Bankruptcies for Americans under 25 have dropped off steep since ’94, from 11% then less than 2% in 2007.

Causes of Baby Boomer Bankruptcy

The study felt that the housing crisis was a key cause of greater bankruptcies for older Americans.  Many found themselves with much-reduced home equity after the housing bubble burst, and some may have filed Chapter 13 to postpone foreclosure on their homes.  No matter what, this increase in bankruptcies could be a reason for the rise in sales at Buy Here Pay Here car dealerships, which have a long history of working with bankrupt individuals. 

For more information on this study, check out this news article.