1.5.22

What to Know About “Buy Here, Pay Here” Car Financing

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An auto loan with Consumers for a new or used vehicle can help you reach your destination.

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There are better alternatives to “no credit, no problem” lenders when buying a used car.

For people with less-than-ideal credit, getting a used car through a “buy here, pay here” dealer might seem attractive. However, this financing method can be costly for buyers. Learn about the drawbacks of financing a car with a dealer who claims, “no credit, no problem” and alternatives for less expensive auto loans.

Much higher interest rates

Dealers with “buy here, pay here” financing tout the convenience of their loans, but they don’t call attention to their higher interest rates. According to the Consumer Financial Protection Bureau research shows that, “…average interest rates at banks are approximately 10%, compared to 15-20% at finance companies and buy-here-pay-here dealerships.” That’s up to double the interest rate!

Higher default rates

The higher rates that come with “buy here, pay here” financing often make monthly payments unmanageable for car buyers. Within 60 days, 25-40% of such purchasers are likely to become delinquent on the loan, Consumer Reports says that’s far higher than the 15% who finance their car through a bank or credit union.

Some dealers don’t report to credit bureaus

One way to improve your credit score is to show a pattern of making monthly loan payments on time. However, some “buy here, pay here” lenders don’t share borrowers’ payment activity with the credit bureaus. Without reporting, there’s no way the loan can help increase your credit score.

Auto financing alternatives that cost less

Dealers who offer “buy here, pay here” options want your loan business because they can make a lot of money on financing. Don’t be pressured into believing you have no alternatives if you don’t have great credit.

If you don’t need a car immediately, you can save the money needed to purchase a used car and avoid financing charges entirely.

If you need a car right away, shop around for financing. Start here at Consumers Credit Union where you can get an auto loan with some of the best rates in Michigan.

All loans subject to approval. Rates, terms and conditions are subject to change and may vary based on credit worthiness, qualifications and collateral conditions.

Consumers provides banking services for more than 117,000 members. If you have banking questions, call us at 800-991-2221. We make it easy to bank how you want, when you want.

Federally insured by NCUA

Consumers auto loans

An auto loan with Consumers for a new or used vehicle can help you reach your destination.

Learn more.

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