Illustration by Andy PottsCar and driver

Extract from the February / March 2021 issue of Car and driver.

For the roughly 2.6 million Americans who bought vehicles from them in 2019, Buy Here, Pay Here (BHPH) dealerships are both a lifeline and a bane. These used car lots act as both a reseller and a lender, reaching out to customers with a credit score below 620, a history of late payments or a repossession or bankruptcy in their past.

In exchange for financing these risky customers, BHPH lots charge above-market prices for their vehicles as well as interest rates of up to 29.9%.

In 2019, BHPH clients defaulted on nearly four in ten loans. For dealers, who can repossess and resell the same vehicle over and over again, it’s just part of doing business. For the hardened people who depend on these cars, however, this is another trap in the poverty trap. They end up poorer, with no transportation, and with another black mark on their credit report.

Kelley Blue Book says a 2012 Chevrolet Cruze with 105,000 miles is expected to sell for between $ 6,400 and $ 8,000 at a conventional dealership, but a BHPH customer could pay more than $ 20,000 over the life of the loan for the same car. Here’s how a used car can cost two very different amounts depending on where it’s purchased.

buy here, pay here

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