Is Buy Here Pay Here Financing Right for You?

Need to buy a car with bad credit? Then buy here pay here financing may be your best option. Most banks, credit unions, and automaker finance departments don't approve financing for people with problems such as:


Chapter 7 Bankruptcy
Chapter 13 Bankruptcy
Repossession
Foreclosure
Very Bad Credit
No Credit
No Cosigner


Buy Here Pay Here car lots, however, work specifically with people who have suffered such credit problems. And buyers are responding. With credit becoming so tight after the economic collapse in late 2008, car shoppers have been flocking to BHPH lots. In 2010, BHPH sales are projected to nearly double from where they consistently stood between the years 2000 to 2007.

Buy Here Pay Here Cars and Financing

Pre-owned vehicles are at the core of most buy here pay here car lots. Fortunately, a pre-owned vehicle is often the most intelligent option for your finances if you've had credit problems in the past. Why? Because brand new cars lose 20%-25% of their initial value the moment they leave the showroom floor. That's because you pay retail, but as soon as the car is sold, dealers will only pay wholesale to get it back. For this reason, new car buyers must face a steep drop in value.

So, for instance, you'll suddenly owe $15,000 for a new car that's worth only $12,000. As you can imagine, that's not a good place if you want or need to sell the vehicle. After all, you'll have to come up with the extra cash to pay off the loan -- often several thousand dollars. A preowned vehicle, on the other hand, has already undergone this initial drop in value.

In the old days, large down payments of 20% or more militated against the negative equity situation that his causes. Today, however, most buyers finance about 95% of their total car purchase.

A down payment is always a good idea if you can afford one. It will reduce your car payments and possibly improve the terms of your auto loan. The good thing is that trade-ins of older cars are usually welcome at BHPH car lots. Whereas you might not get much in trade equity at a traditional dealer, you might find your existing vehicle can secure you a handsome down payment on your new one. On the other hand, you could see your existing vehicle to a private buyer and then turn that cash around for a down payment.

Fitting a New Vehicle in Your Budget

The single most important priority when financing a new car with poor credit is not to overextend your finances. Most financial experts recommend dedicating 20% of your monthly income to transportation costs. Remember that this includes more than just your car payment. The true cost of ownership is much higher, taking into account fuel, insurance coverage, maintenance, registration and title fees, and other costs like municipal transportation or secondary vehicles all factor into this budgeting allocation.

Bad Credit is Still Standing in Your Way?

If you still can't get approved for a new car loan, you should take steps to start rebuilding your credit. There are 2 initial methods of boosting bad credit: secured credit cards and large installment loans.

A secured credit card is designed to help those with damaged credit begin rebuilding their score. It is "secured" by a savings account that holds sufficient funds to pay off the card balance.

Large installment loans include automobile and home loans. Although most mortgage lenders are more discriminating about problematic credit history, a BHPH car dealer can grant you an auto financing loan. If you make your installment payments on a timely basis, and your dealer reports your payments to the credit bureaus (ensure he does), then your new vehicle can be a powerful tool in rebuilding your credit.

Whether you need to find a buy here pay here car lot in Nevada or any other state nationwide, you might want to apply online via a trusted BHPH source such as BuyHereNPayHere.com. Typically you can find out if you've been approved for financing within 24 hours.

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