Debt Relief

The BHPH Conundrum

Each year, thousands of Washington consumers choose to purchase cars from “Buy Here, Pay Here” car dealers, known in the auto industry as BHPH. The reasoning is simple:  these dealerships will allow customers to finance vehicles, even if they have major credit problems stemming from bankruptcy or repossession or other such issues. For most people in the US, a vehicle is a necessity for work and family life. But for nearly as many people, coming up with the funds to buy a car outright is very, very difficult. That’s why more than 7 out of every 10 new cars are leased or financed. Most people just don’t have the cash laying around to put into a car.

Rock and a Hard Place

Add poor credit to the mix, and consumers can easily find themselves between a rock and a hard place. They need to finance a car, but they don’t have the credit to do so. This is where BHPH dealers come in. They are the option of last resort. The problem is, they charge terribly high rates of interest. To be fair, they are financing consumers that the major banks and credit unions will not even touch. Still, even if the rates they charge are justifiable from that perspective, they still cost consumers a lot of money. In fact, such high interest rates can be downright risky, because they can quickly cause the owner to be upside down–ie, owing more on the vehicle than it’s worth. This can be a serious issue in the case of an accident that totals the vehicle for instance. If the vehicle is worth $8000, and you owe $12,000 on it, the insurance company will only give you the $8000, leaving you $4000 in the hole. In some cases, a judgment of this amount could come into play.

Alternatives

If you have bad credit, it’s usually best to work through a reputable intermediary such as Evergreen Auto Finance (link). They can allow you to apply online, then find you a lender or dealer to accept your application. Even if you have very bad credit, you can typically get approved without resorting to a BHPH dealer. A lending specialist can guide you through the process, helping you secure a rate that won’t turn you upside down on your vehicle and terms you can live with.

Tips if You Do

If you do move forward with BHPH, it’s absolutely essential to do your homework ahead of time. Research any dealer before you go to the lot, leveraging Google, the Washington State BBB, your social media network, word of mouth, and perhaps a dealer directory resource like this one. You want to ensure that you are working with a dealer that has a track record of trust and fair dealing, as the BHPH industry is notorious for just the opposite.