Auto Financing Scams to Avoid

There are times when we may find ourselves in a situation where we are in dire need of an automobile. There are many companies who advertise that they will extend credit to buyers no matter how low their credit rating may be. While on the surface, it seems that they are being generous and trying to help out those who are in a bind, this is not always the case. There are a couple of things that should be avoided when looking into buy here pay here financing.

The best way to avoid a bad loan situation is to carefully read all the terms on the paperwork. Make sure every word of every section is read thoroughly before signing any documents. Also remember that if the salesperson is all too eager to make the sale and is applying way too much pressure for your comfort, it may very well be a scam of some sort. Take time to make the decision. High pressure, overly aggressive salesmen are the first sign something is not “above board” at buy here pay here car dealerships.

Auto sales who guarantee a loan should be avoided. Sure, they will give anybody a loan, but the interest rate may be out of this world.

Be very careful when asked to find a co-signer. Many times the paperwork is changed, and the co-signer is put down as the principal borrower! this can end up harming both your credit, their credit, and your relationship in a profound way.

Boosting Your Credit for Car Loans

Historically, the percentage of Americans who suffered from a poor credit rating was only 15%.  According to Jean Chatsky, a Today Show financial analyst, more than 25% of American borrowers now have credit scores below 600…that’s 43 MILLION of us!  And don’t think that bad credit is no big deal.  According to Brad Tuttle of Time Magazine, a bad credit history can cost you $200K over the course of your lifetime.

Right now, interest rates are a record lows.  Many people could save money if they could refinance their mortgage or auto loan, but unfortunately, low credit scores are keeping them from having access to these savings.  They can’t get approved for loans.  Now wonder sales at Buy Here Pay Here car lots continue to rise.  Nobody is getting approved via the conventional lending channels.

What You Can Do to Boost Your Credit

So all these stats beg the question:  what can I do to boost my credit score?

  1. Pay Bills on Time. This accounts for 35% of your credit score.  To ensure that you don’t miss payments, elect to use automated bill payment whenever possible.  That way your bills will be paid even if you forget.
  2. Limit Your Credit Use. Credit utilization accounts for 30% of your score.  Use a mix of cards.
  3. Keep Your Old Credit Accounts Open.  By closing them, you increase your credit utilization by decreasing your available credit.  15% of your score is the length of credit history.
  4. Diversify Your Credit Use. Creditors want to see that you aren’t a “one-trick pony” when it comes to repaying your debts.  A solid “credit mix” shows them this.

BHPH Sales Soaring to New Heights in 2010

A recent study by CNW Research Group is showing that Buy Here Pay Here car sales have absolutely soared since the economic downturn.  Between the years 2000-2007, BHPH cars consistently represented about 3% of all used vehicles sold, never drifting higher than 3.64% and falling as low as 2.71%.

Nationwide Credit Problems Boost BHPH Car Sales

With the recession, however, auto loan credit requirements became much stringent and the sales market for new cars all but collapsed.  Many consumers who could no longer get approved at a traditional dealership turned to Buy Here Pay Here financing.  Nobody else offers such easy auto loans for bad credit.  And car buyers weren’t the only ones — traditional car dealers looked to the BHPH market for higher profit margins and easier credit approvals for their customers.  After all, getting a buyer approved for financing is just as important to dealers as to their customers.

BHPH Sales By The Numbers

Buy Here Pay Here cars as a % of total used cars sold:

  • 2007:  3.18%
  • 2008:  3.84%
  • 2009:  5.21%
  • 2010:  6.37% (projected)

Total Number of Buy Here Pay Here Cars Sold:

  • 2007:  1.32 Million
  • 2008:  1.40 Million
  • 2009:  1.85 Million
  • 2010:  2.37 Million (projected)

The Mainstreaming of Buy Here Pay Here

Another telling statistic is average value per BHPH unit sold.  The average cost for a BHPH car is now around $6,000, with more than 1/3 of them being sold for greater than $8,000.  With new dealerships stepping foot into the market, BHPH is no longer the sole preserve of independent car lots, and buyers with very poor credit history are no longer the only customers.  At Buy Here ‘N Pay Here, we work with all types of BHPH dealers and lenders to get you approved for financing no matter your credit score or past credit history.  Apply online today!

Avoiding Predatory Lending Techniques

Although the term predatory lending in recent years has become intrinsically linked with the calamitous subprime mortgage bubble, it continues to plague other areas of consumer lending such as home loan modifications, payday advances and even auto loans. Along with the Fair Debt Collection Practices Act (FDCPA), there are many other laws set up to mitigate the incidence of predatory lending, including the Fair Housing Act, HOEPA, TILA and RESPA.

Along with learning about the specifics of these various laws, consumers (especially those with bad credit) should be on the lookout for a variety of predatory lending red flags.

Red Flags

  • Excessive yearly interest rates (often referred to as “dealer kickbacks”)
  • The targeting of loans to specific ethnic or gender groups (a.k.a. redlining)
  • Exorbitant bank overdraft fees
  • Additional credit card service charges
  • Loan packing, or mandatory add-ons for financing approval
  • Conditional sales agreements (known as “yo-yos” in auto financing)

New laws enacted by the Obama Administration have gone a long way towards forcing the credit card companies to disclose the impact of rates being charged and the long-term cost of minimum monthly payments. But as far as any new loan, credit card, or auto financing arrangement, consumers must now, more than ever, make an effort to understand the fine print before committing to any formal arrangement.

Easy Auto Loans for Bad Credit

Easy Auto Loans for Bad Credit
Auto Loans Made Easy - Apply Online!

It used to be that getting an auto loan with bad credit was an enormous hassle.  Here’s an example of how it used to work:

  1. Go to Lender 1:  Credit Rejected
  2. Go to Lender 2:  Credit Rejected
  3. Go to Lender 3:  Credit Rejected
  4. Repeat Steps 1-3 at Other Lenders:  Get Rejected
  5. After Multiple Attempts:  Credit Finally Approved

Buy Here ‘N Pay Here:  Putting “Easy” Back into Credit Approval

With the rise of the internet, you can streamline the financing approval process into a few minutes at your keyboard.   In less than 3 minutes, you can submit your credit application for pre-approval from a vast national network of lenders, dealers, and buy here pay here lots (BHPH).

BHPH dealers provide easy auto loans for bad credit.  Unlike a more traditional bank or lender, they probably won’t blink an eye when you need an auto loan with 600 credit score or worse — especially if you use our system to get pre-approved online.

That said, Buy Here Pay Here financing is typically more expensive than auto loans from better credit lenders.  This covers the dealer’s risk when lending to high-risk borrowers with very poor credit, bankruptcy, or other financial disadvantages.  If your credit permits, our system will try to match you to a traditional lender offering lower rate auto financing than you’re likely to receive from a BHPH dealership.  Apply Online!

Consider a Car’s True Cost of Ownership

When buying a new car too many Americans go beyond their budget on the costs of owning a car that are often forgotten at the time of purchase. For instance, you may go to your Buy Here Pay Here car lot, negotiate the car’s total price, and then negotiate the total cost of your monthly payments, say $350. But once the deal is done, you realize you can’t go anywhere without car insurance, or gas. Plus there are the periodic expenses such as oil changes, tire rotations and vehicle registration.  This is true whether you own an ultra-green Prius or a super-luxury BMW.

True Cost of Car Ownership
Don't Forget Maintenance Costs!

Before you purchase your new car, work out a budget of your monthly expenses to figure out how much you can spend on a new car. This is PARAMOUNT, especially if you need a 600 credit score auto loan or lower.  Now take that number, say it’s $500, and subtract your monthly insurance payments (and since insurance premiums consider what type of car is being insured, you may need to get a new quote from your provider) and maybe that takes it down to $410. Next take periodic maintenance and knock off another $20 and annual registration divided by 12 months, that’s may be another $10-$20 depending on your state and your vehicle.

So while you may have thought you could pay $500 a month for your new car, you really only have about $370, and that does not even include unforeseen major repairs.

Of course, this is just a rough estimate, but once you know more about your specifics, you can try using Yahoo’s Total Ownership Calculator.

Some cars cost less to own than others, so choose the models you are considering and do some comparison shopping before you select which one you want.  To pre-arrange financing through Buy Here ‘N Pay Here online, click here.

Car Buying Questions to Ask

Car Buying Questions

The car buying process can rattle the nerves, particularly if you have a credit score of less than 600.  Preparation is essential to boosting your confidence and getting the best deal possible.  Too many car buyers drive off in their new car still unsure of what they just agreed to.  Car financing terms are too long to lock yourself into without making sure your needs are met.  Make sure you know ask the right new and used car buying questions.

Key Questions when Buying or Financing a Car:

  1. What interest rate am I paying? Knowing your credit score and what level of interest rate you should qualify for before you set foot on the lot is important.  Dealers will often make excuses for why they want to charge you higher interest rates than you should be paying.
  2. What do possible loan penalties include? Some lenders actually charge penalties for paying the loan off early.  These are typically related to “precomputed” auto loans, and you would rather opt for a “simple interest” auto loan if you plan to pay off the loan prior to the agreed term length.
  3. What is the exact total price I will be paying today and over time for my vehicle? Too many car buyers are so concerned with monthly payments that they wind up paying sticker price.  Focus more on the bottom line, once that has been negotiated, then you can sort out the monthly payments.
  4. How much will I be paying each month? Only after the car’s price has been negotiated do you want to ask about monthly payments.  Factors like the term of the lease may be adjustable to help you meet your monthly goal.
  5. For how many months/years will I be making these payments? Knowing how long you’ll be in debt may be very important to your financial future.  As car payments may prevent you from moving forward on other investments like buying a house.
  6. Has my loan been placed already or is my purchase contingent upon the approval of a third party lender? A popular dealer scam involves calling buyers back to the dealership with news that financing has not been approved in order to hike up interest rates.  Make sure when you leave the dealer or buy here pay here car lot that this won’t happen in your case.

Ready to find a dealer or lender near you to pre-arrange financing?  Click here to get started!

The True Cost of Credit Score

If you’re shopping for a car with less-than-perfect credit, you’ve heard again and again about the importance of your credit score for:

  1. Getting Approved
  2. Determining Your Auto Loan Interest Rate

At Buy Here ‘N Pay Here, we pride ourselves on helping consumers accomplish #1:  getting approved for Buy Here Pay Here financing.  We have only indirect control, however, when it comes to determining what interest rates.  After all, it largely comes down to credit score.  What we can do is provide you the information you need to:

  1. Get the Best Rates with the Score You Have
  2. Increase Your Credit Score for Improved Rates

So that the subject won’t seem purely academic, let’s look at a sample case that showcases the power of credit score in the auto financing process.

Currently, the average interest rate for a buyer with a credit score ranging from 660-690 (the upper end of Nonprime auto loans) is around 9%, while the average interest rate for scores below 660 (Nonprime to Deep Subprime auto loans) is around 13%.  That’s a difference of 4 percentage points.  Let’s look at how this plays out over the course of a 60-month $15,000 auto financing loan.

Interest Paid over Life of Loan

  • 660-690 Credit Score, 9% Interest Rate: $3683
  • Sub-660 Credit Score, 13% Interest Rate:  $5478

That means dropping a single credit tier could cost you $1795 on this vehicle; conversely, improving your credit a single tier could save you that much.  To put this in even greater perspective, that’s a 12% savings or cost on the original price of the vehicle.

Car Loan with 600 Credit Score: Get Approved

Apply for Buy Here Pay Here Financing

Auto loan shoppers with FICO scores of 619 and below are regarded as having bad credit. This means getting approved can be challenging and time-consuming, but NOT impossible.

Traditional vs Non-Traditional Car Lenders

Credit unions and banks typically offer the best auto loan rates; unfortunately, they’re notoriously picky when it comes to high-risk and bad credit applicants. Many have minimum credit score requirements. If yours is too low, you could get auto-declined, no questions asked.

If you need an auto loan with 600 credit score or lower, your best bet is probably a subprime lender or non-traditional dealership that offers in-house buy here pay here financing. Dealers offering this type of financing range from small independent car lots to franchise mega-dealerships with special finance departments.

Maximizing Your Chances of Approval

Car Loan 600 Credit Score
Car Loan with 600 Credit Score: Apply Today!

Since the economic downturn that hit the nation in the fall of 2008, car credit applicants have been having a tougher time than ever getting approved for financing. Auto loan rates with bad credit are typically in excess of 10%, and that raises monthly payments to a level that applicants have too high a payment-to-income ratio to get approved. After all, if your car debt takes up too much of your income, you’re likely to run into trouble making payments.

The good news is it’s now becoming easier to get approved, especially if you utilize Buy Here ‘N Pay Here to find a dealer or lender willing to extend you credit. Instead of running all over town filling out applications, you can fill out 1 application from the comfort of your home computer and our system will attempt to find you a dealer or lender willing to approve your 600 credit auto loan.

Finding the right dealer is key.  Recently dealers have reported being able to get 75% of people approved for a 550 credit score car loan.  To find a local Buy Here Pay Here dealer willing to approve you for in-house financing, apply online.