When it comes to owning a vehicle, most people cannot afford to buy one outright, which results in them requiring some form of loan or credit that will allow them to pay it off. In cases where a potential buyer has a bad credit score or cannot obtain loans for other reasons, the option of buy here pay here financing may be the right choice for them. This type of financing works a little differently to regular vehicle financing.
Proof of Income Still Required
Many people think that they will not have to provide any proof of income if they are purchasing a vehicle from a buy here pay here financing dealership. However, this is not the case, as they will still need to demonstrate to the dealership that they will, in fact, be able to pay for the vehicle they want to buy. As a result, anyone who wants to buy a vehicle at these car lots will still need to provide proof of income before the dealership will consider processing the purchase. Once the dealership is satisfied that the potential buyer will, in fact, be able to make regular payments, they will then go about showing them which vehicles on the lot will fit into their budget.
Strict Payment Schedules
When buying a vehicle from a buy here pay here financing dealership, it is crucial for buyers to remember that they will need to ensure that every payment is made on time – even paying a day or 2 days late could have severe consequences. Buy here pay here financing dealerships have to provide their own financing to buyers, which means that they have to be even stricter than banks or other lending institutions when it comes to the granting of loans. In some cases, these dealerships have been known to repossess vehicles when a single payment is even 1 to 2 days late. Some of these dealerships go so far as to install vehicle tracking devices so they can be collected anywhere in the event of the buyer defaulting on a payment.
Interest May be Higher
Owing to the fact that buy here pays here financing is not underwritten by a bank or credit union, buyers may have to be prepared to pay slightly higher interest rates than if they had purchased from a regular car dealership. The interest rates that are charged will normally depend on the potential buyer’s existing credit rating (if they have one) and how long they are going to take to pay the cost of the vehicle off in full to the dealership. Buyers who have a small deposit to put down may be able to reduce their interest rates as well.
Buy here pay here financing is a great option for anyone who needs to purchase a vehicle in an emergency, but who may not have cash or a great credit rating to secure a decent vehicle loan. However, it is important for buyers to ensure that they read the contract properly before signing it.