The first thing that comes to mind is how can there be such a thing as credit used car financing. The answer is that there is a huge demand and need for cars and if you excluded all buyers with less than perfect credit, you would significantly reduce the consumption of vehicles and hinder the growth of the economy. So to meet that need, there is a little-known segment of the auto retail business that sells and finances vehicles for buyers who have credit that most lenders would refuse.
The dealers that offer a used car loan are usually called Buy Here Pay Here (BHPH) dealers or car lots. The terminology of buy here and here is not a secret, in fact it is quite simple. You buy from the dealer and you pay at the same dealer. In short, the dealer or car lot is not only the seller of a used car, they also act as a bank or lender. These branches only offer used or used vehicles for sale, rather new vehicles to reduce their risk.
Auto financing options for every credit status
You may have noticed that bad credit is advertised or that any credit qualifies for financing with certain dealers, which is basically internal financing offered at buy here car dealers. These are the dealers that have used car credit options. They are not bound by the underwriting or regulations that most auto borrowers use to determine whether a borrower is a good risk or not. They decide to vote in the showroom for a car loan. The methods they use to decide whether they will fund your vehicle choice are based on income, time at work, and length of time at your address. One of their favorite sayings is “If you have a job, you are approved”.
This rather unconventional way of financing used cars has grown steadily for a variety of reasons, from the economy to a higher number of bankruptcies. Most importantly, people with bad credit can still get a vehicle. If these people could not get a reliable vehicle, they would have problems keeping and finding jobs, supporting their families and running the day-to-day business. So there is a real need for a credit vehicle financing.
Somewhere between having great credit and extremely bad credit, there are people who have credit that may not qualify for the conventional car loan from a car manufacturer’s loan unit, but they can qualify with so-called subprime lenders. These lenders specialize in providing car loans to the person with marginal credit who needs to buy a car. They use the buyer’s credit score to determine eligibility, along with income and length of service. However, they also have certain provisions for the car loans they approve. These provisions may limit the dollar amount of the loan, the term of the forward contract, the age and mileage of the vehicle, and the amount of down payment the buyer must have before final approval is given.
These sub-prime lenders don’t have used car financing for bad credit, but they charge less interest on their loans than the sale here that the car dealer pays, or at least in most cases. As you can see there really is a solution for every credit used car financing, the only difference is where or with whom the transaction is done.