No Credit Car Dealers
No credit car dealers can be a valuable – but possibly expensive – option for people who need to buy a vehicle and who lack good credit.
Whether you are just starting out and haven’t established a credit history, or if you’ve had some financial difficulties – no credit car dealers might help you get back on your feet.
Sometimes having credit difficulties can be a double-edged sword:
Lack of credit (or bad credit) makes it really difficult to buy a dependable vehicle, and
Not having a dependable vehicle makes it hard to get to work and hold a decent job.
If you find yourself in that unfortunate situation and need an affordable vehicle, then financing with a no credit car dealer might just help you break out of that no car = no job = no car Catch 22 cycle!
No credit car dealers are also commonly referred to as “Buy Here-Pay Here” dealerships.
Need more information?
We can answer your questions here:
But is using a no credit car dealer a good idea, or a bad move?
Ultimately, it depends upon your specific situation at the time.
Here are some tips and some advantages – and some disadvantages – of using bad credit or no credit car dealers:
Advantages of No Credit Car Dealers
- Bad credit, no credit, bankruptcy or other money problems can usually be overlooked.
These dealers act as their own bank or lending institution, so the approval process isn’t subject to the same rules and “best practices” of your local bank or credit union.
placeholder - Quick and straightforward:
There’s no need to reach an agreement on a vehicle and then deal with a lender to arrange the funds.
Once you’ve reached an arrangement with the auto dealer, the only other business to conclude will be taking care of the insurance requirements.
spacer - Flexible down payment arrangements.
The dealer can play a little loose with the rules since they make the rules.
line break - No trade-in or older trade-ins may be more readily accepted.
Having a trade-in brings some value to the transaction even if the trade isn’t something a traditional auto dealer might want.
new line - Creative payment schedules.
This can be a problem in disguise – be sure to read about “non-traditional payment arrangements” below!
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Disadvantages of Bad Credit Car Dealers
- Higher interest rates.
Because they are offering financing to higher-risk individuals, no credit auto dealers usually charge significantly higher interest rates – think like credit card high interest rates in the neighborhood of 22% or so.
sentence break - Hidden costs.
Some dealers will have expenses like “administrative fees” or “detailing services” that are tacked on unexpectedly. You might not know about the extra cost until it’s time to sign.
new line - Non-traditional payment arrangements.
Some dealers will require odd payment arrangements such as weekly payments. That helps them limit their risk if you fall behind on payments, but it might also make it more likely that you will fall behind. It’s also not uncommon for them to require you to make payments in person at their location. Having you appear regularly at their office gives them an opportunity to see the vehicle and caution you about the consequences of late or missed payments.
space holder - May not report to credit bureaus.
That means that a history of on-time payments will do nothing to boost your credit score.
place holder - Vehicle tracking.
Many bad credit dealers install tracking devices. That will make it easier for them to repossess the vehicle if you miss a payment or two. Oftentimes they can remotely disable the vehicle and then come after it without warning.
Avoid The Hazards Of No Credit Lenders!
Keep in mind that the vehicle IS the loan collateral – it’s the car or truck that “secures” the loan. If you miss payments, they will simply come and get the vehicle and you will be minus the car – and the money you have already paid toward the purchase of it.
So it’s pretty plain to see that using no credit car dealers probably shouldn’t be your first choice – if you have other choices.
But when your options are limited, the advantages of a buy here – pay here arrangement can make the difference between riding and walking.
As with any major purchase – shop around.
Compare down payments, payment arrangements and interest rates. Be sure to read over any legal documents before signing to look for hidden fees or terms that weren’t spelled out during negotiations.
If you do your homework and your due diligence, you can get reasonably favorable terms from a bad credit auto dealer and wind up with a pretty decent deal.
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