If you’re in the market for a new car but have less than perfect credit, you may have come across the term “in-house finance car lots.” These are dealerships that offer financing options directly to their customers, regardless of their credit history. In this article, we’ll explore what in-house finance car lots are, how they work, and what you should know before considering this option.
What are In-House Finance Car Lots?
In-house finance car lots, also known as buy here pay here (BHPH) dealerships, are car dealerships that not only sell vehicles but also provide financing options directly to their customers. Unlike traditional dealerships that work with third-party lenders, in-house finance car lots act as both the seller and the lender.
These dealerships target individuals who may have poor credit or a limited credit history, making it difficult for them to obtain financing through traditional channels. In-house finance car lots often advertise that they can “finance anyone” and provide quick and easy approval processes.
How Do In-House Finance Car Lots Work?
When you visit an in-house finance car lot, you can choose a vehicle from their inventory. Once you select a car, you’ll undergo a credit check, but unlike traditional lenders, in-house finance car lots are more lenient when it comes to credit scores.
If you’re approved for financing, you’ll typically need to provide a down payment and agree to the dealership’s terms, which may include higher interest rates, shorter loan terms, and weekly or bi-weekly payments. In-house finance car lots often require direct payment at the dealership or through automatic bank transfers.
Pros and Cons of In-House Finance Car Lots
Like any financing option, in-house finance car lots come with their own set of advantages and disadvantages. Here are a few to consider:
1. Easy Approval: In-house finance car lots often have more lenient approval processes, making it easier for individuals with poor credit to get approved for a car loan.
2. Convenience: Since the dealership acts as both the seller and the lender, you can complete the entire purchase process in one place.
3. Flexible Terms: In-house finance car lots may offer more flexible terms compared to traditional lenders, allowing you to negotiate the loan duration and payment schedule.
1. Higher Interest Rates: Due to the higher risk involved with financing individuals with poor credit, in-house finance car lots may charge higher interest rates compared to traditional lenders.
2. Limited Vehicle Selection: In-house finance car lots often have a smaller inventory compared to traditional dealerships, limiting your choices when it comes to car models and features.
3. Repossession Risk: If you fail to make timely payments, in-house finance car lots have the right to repossess the vehicle without going through the lengthy legal process usually required by traditional lenders.
What to Consider Before Choosing an In-House Finance Car Lot?
Before deciding to purchase a car from an in-house finance car lot, here are a few factors to consider:
1. Budget: Evaluate your financial situation and determine how much you can afford for a down payment, monthly payments, and additional expenses like insurance and maintenance.
2. Research: Research different in-house finance car lots in your area to compare their inventory, interest rates, loan terms, and customer reviews.
3. Inspect the Vehicle: Thoroughly inspect the car, preferably with the help of a mechanic, to ensure it is in good condition and meets your needs.
4. Read the Contract: Carefully read and understand the terms and conditions of the loan contract before signing. Pay attention to interest rates, payment schedules, and any additional fees or penalties.
1. Can I get approved for financing at an in-house finance car lot with bad credit?
Yes, in-house finance car lots often specialize in financing individuals with bad credit or no credit history. They have more lenient approval processes compared to traditional lenders.
2. Is the interest rate higher at an in-house finance car lot?
Yes, due to the higher risk involved, in-house finance car lots may charge higher interest rates compared to traditional lenders. It’s important to carefully consider the long-term cost of the loan.
3. What happens if I miss a payment?
If you miss a payment, in-house finance car lots have the right to repossess the vehicle without going through the lengthy legal process usually required by traditional lenders. It’s crucial to make timely payments to avoid losing your car.
4. Can I negotiate the terms of the loan at an in-house finance car lot?
Yes, in-house finance car lots may offer more flexibility when it comes to loan terms. You can negotiate the loan duration and payment schedule to better fit your financial situation.
5. Can I trade in my current vehicle at an in-house finance car lot?
Yes, many in-house finance car lots accept trade-ins as part of the purchase process. The value of your trade-in can be used towards the down payment of the new vehicle.