How "Buy Here. Pay Here." Dealerships Hurt Consumers

"If you find yourself in a hole... stop digging." - Will Rogers

Take a drive down the various roads that make up the Commonwealth of Massachusetts, and eventually you will come across signage indicating that a "Buy Here, Pay Here" dealerships has taken up residence and set up shop. The buildings themselves may look clean and inviting, their lots offering the promise of being able to locate a good, quality used car, even their salespeople genuine and warm. Unfortunately, for many consumers, they are drawn in and if they sign, typically pay dearly. These dealerships make a lot of money preying upon the needs of the people they are promising to help. The consumers have fallen in a hole and instead of being given a rope, they are handed a shovel. 

So, what is a "buy here, pay here" dealership? Typically, they advertise themselves as a "one stop shop", being able to get you into a used vehicle even if you have bad credit. How? They will often usually provide "in-house" financing to a consumer with a less-than-stellar credit and charge them the maximum interest rate they can legally get approved, typically ranging from 18% - 21%. Ouch. The bigger and more sinister problem, most consumers are not aware of the hole they are digging around them. 

Let's use a Chevy Malibu as an example, you find one at your local "buy here pay here" dealership, after speaking with the salesperson you learn that you will be required to make bi-weekly payments of $164, and will be required to do so for 6 years to pay off the note. The cost of the car if you were to buy it outright is $14,000 which seems fair to you, and you agree to take the loan. Unfortunately, if you had taken the extra time to do a calculation, you would see that at the end of the 6 year period, you would have paid $25,584 for the same $14,000 vehicle. The "buy here, pay here" dealership caught another one hook, line, and sinker. The kicker: try trading that vehicle in and see if you get anything close to the price you paid. You simply cannot and the cycle starts again. More dirt, bigger hole.

So, as a consumer with hurting credit, what can you do? Talk with a finance counselor who has your best interests at heart, here at Harbro, we'll tell you what your interest rate is, and we'll let you know if we do not advise taking a loan in your current situation. You can also work on paying off old debts hurting your credit score, a better credit score equals a better interest rate. Or perhaps, you will need to find a co-signer whom is willing to help you secure a good car at a good rate. We walk you through the steps as best we can.

If you, or anyone you know, is currently in the market for a vehicle and you are considering a "buy here, pay here" dealership, please do yourself a favor and give us the opportunity to see if we can help you first. We want to see you out of the hole and walking the field. It is just how we choose to do business. The right and honest way. 

Categories: Finance, News