Financing a car with a credit score of 600 or less can be an absolute headache. Buy here pay here dealerships can offer financing to virtually anyone, regardless of credit. They make all credit decisions on-site, so they can support a wider range of consumers. Rather than a bank or finance company receiving payments for the financed vehicle, the dealer will take all payments. These dealerships generally market their services with phrases like: we tote the note, we finance, your job is your credit, or rent to own. They have been springing up across Colorado since the 2008 recession, as the credit of many consumers was damaged during that time, forcing them to turn to alternative means of financing.
Requirements for BHPH Financing
Although your credit score might not be a factor for approval, most Colorado buy here pay here dealers do want to see that you earn at least $1500 a month, preferably from W2 income. Keep in mind, this is your income before taxes are taken out. Don’t meet the minimum requirements? You can still apply, as long as you have someone to cosign. The real reason for this income requirement is simple: dealers want to know you can afford your payments.
At the same time, a down payment is typically required. That’s because buyers with bad credit typically default at a higher rate, so dealers try to get as much cash upfront as they can. This could mean a down payment in excess of 30% of the vehicle’s purchase price, which is a large “chunk of change” for most consumers.
Downsides of BHPH Financing
There are a number of downsides to this type of financing:
- High rates of interest.
- High down payments.
- High-mileage vehicles.
- High rates of repossession.
Repossession, especially involuntary repossession, is a very unpleasant experience. Not only do you lose your car and down payment, if the dealer reports to the credit bureaus, it could crush your credit. This is not always the way it is with BHPH dealerships, but repossession should be avoided nevertheless. To avoid such an issue, get a vehicle with low monthly payments, perhaps just 5-8% of your monthly income. You also need to carefully read through your contract with the dealer. You need to know the rules surrounding late payments and repossession. Every so often dealers can repossess the vehicle after only one missed payment.
Alternatives to Buy Here Pay Here Financing
Nobody wants to cruise around town, hoping to find a dealer who will approve your credit. That’s where we come in. Here at Colorado Auto Finance, we get you approved to finance a car in less time, with fewer hassles. The whole process is quick, safe, and secure. Don’t hesitate. You could be cruising around in your new car or truck by day’s end! Our dealers will take applicants who have scores of 600 or less, which means credit isn’t an issue, and unlike BHPH dealers, they can provide you with more competitive rates, as well as the 0pportunity to rebuild your credit.