Buy Here, Pay Here
November 3, 2011 6:59 PM   Subscribe

Are there any tips on dealing with "Buy Here/Pay Here" dealers? Are there any alternatives for someone with not-so-great credit?

My friend totaled his car about a week ago and needs one to get to work. He's been renting a car the past week from Rent-a-wreck but that is very expensive.

In a nutshell...

*Hit a traffic light; no other cars involved, no alcohol, etc.
*Had his insurance lapse and had minimum coverage anyway and just got it reinstated after the accident.
*Has poor credit, but not bottom of the barrel... Owes some bills and went in foreclosure and got his truck repo'd but is paying all that off little by little.
*Has a steady, long-term, middle class job (teacher).
*Took out a pension loan to buy the car which he totaled (so that's out)

He needs a car ASAP to work and can't really pay in full for anything workable (something reliable that doesn't need work on craigslist or an auto auction) and doesn't know anyone personal selling a car. Dealers won't approve him without a large down payment and he doesn't want anyone to cosign for him. I keep telling him craigslist is probably the best way to go for something very cheap, but he's leery.

So he thinks the only option for a car quickly is a buy here pay here dealer. I went to two of them with him so far and we both know they are ripoffs; almost double the Kelley Blue Book value for most of them.

So generally, are there any tips with dealing with these people? Any other alternatives? I live in Philly and he's in South Jersey if there's anything local.
posted by daninnj to Travel & Transportation (17 answers total) 3 users marked this as a favorite
They are ripoffs; they are always ripoffs. Ripping off and charging 2x+ the Kelly Blue Book value is what they do; asking them to do otherwise would be like asking a mafia loan shark to give you a 2.0% loan. Craigslist is tricky for buying a car, yes, but "tricky" is orders of magnitude better than "A business model explicitly constructed around soaking people who are fully expected to default on their payments."
posted by Tomorrowful at 7:08 PM on November 3, 2011 [5 favorites]

Recently in the Blue if you missed it.
posted by -harlequin- at 7:10 PM on November 3, 2011

Full-size American sedans that are roughly 20 years old are cheap and generally will keep going forever. Look for an older person selling off a car they bought new. It will not be stylish but it will generally run for a long time. Ideally, you want as base model of a car as you can find. Thinking early 90s Park Avenues, etc.

You can get one of those off CL for the same money as a down for a crappier car at one of the ripoff lots.
posted by maxwelton at 7:12 PM on November 3, 2011 [3 favorites]

I've purchased two vehicles off Craigslist, both financed through my credit union, without any problems. Has he tried talking to his bank or credit union to see what kind of financing he can get for a used vehicle?
posted by spikeleemajortomdickandharryconnickjrmints at 7:21 PM on November 3, 2011 [3 favorites]

My credit union has a loan program to re-establish credit, it might help you talk to an officer. I don't have any personal experience with those dealers except through a friend whose car fell immediately apart. Best luck to you.
posted by francesca too at 7:25 PM on November 3, 2011 [2 favorites]

Yes. Finance through a credit union. They are MUCH more likely to give you a good deal than a dealership or national bank, and most certainly better than a ripoff lot. About 10 years ago when I was fresh out of college and my credit was horrible and I had terrible income, a credit union was my saving grace and really is the reason I was able to re-establish my creditworthiness by allowing me to finance a car through them. He's a teacher. Maybe try a credit union for teachers.
posted by erstwhile at 7:49 PM on November 3, 2011 [2 favorites]

Find small charitably-supported organizations that get contributions from rich people. I bought a Honda Civic from one of these for a couple hundred bucks, put 180K miles on it and sold it for what I paid. You definitely have to be on an inside track and for this deal I was.

The Honda had faults. The trunk lid wouldn't stay open (push torsion rod back into position) and the fan didn't work except at high speed (replace fan resistors).
posted by jet_silver at 8:35 PM on November 3, 2011

BHPH dealers are not selling you a car: they are loan sharks who use cars to sell extortionate loans.

What everyone else said about CUs and Craigslist.
posted by holgate at 9:01 PM on November 3, 2011 [3 favorites]

See if you can find large dealerships that have BH/PH "side lots." Several auto dealers down here have added self-finance lots as a way to move older used cars they might have auctioned off. These places are less shady than a "two cars and a tow truck" operation, mostly because they have the same name as the parent dealership so there's a bit of a reputation to try to preserve.

Other key things to look for before dealing with BH/PH dealers:

* How often are payments due? Some advertise "payment of only $299!!!" but that's bi-weekly. If they won't accept monthly payments, look elsewhere.
* Do they use any form of automatic vehicle lock or GPS to track payments? If this bothers you, look elsewhere.
* How many lots does the dealer have? Try to find companies with more than a few lots, or, as mentioned, are attached to a "name brand" new car dealer.
* Will the dealer discuss price before running credit? Have your friend do his own math--assume a crappy interest rate, say 20%--for what he can afford before going. Know how much this means he can spend on a vehicle, including costs for registration, etc. If they insist on running credit before talking price, walk.
* Can the vehicle be inspected by an independent mechanic of your friend's choosing before the purchase (with no purchase paperwork signed)? If not, walk.

It is possible to have a successful experience with a BH/PH dealer. Unfortunately, the consequence of crappy credit is that "buying" money (e.g. a loan) costs both more money and time. I used a buy here/pay here dealership in Texas a few years ago. The loan was 18% (the maximum allowed for Texas lenders) and the truck was about 20% above KBB. It wasn't outlandishly expensive, but it did cost a premium. I successfully made my payments--an amount I was comfortable with before signing--and completed the loan.
posted by fireoyster at 9:37 PM on November 3, 2011

I would recommend buying a clunker with the money he'd use for the down payment at Uncle Billy's Used Car Lot. This way, he has a car, it's paid for, and he doesn't have to worry about losing the car if he falls behind on a payment. If he's worried about repairs, hey, they're still cheaper than what you'd pay the used car dealer. And those used cars aren't always exactly mechanically sound, either. Some dealers will rebuild crashed cars, sell cars after masking mechanical problems, etc. Buy the clunker, save for a better car, and avoid the hassle of the Buy Here Pay Here places.
posted by azpenguin at 9:40 PM on November 3, 2011 [1 favorite]

I know I argued the opposite in the MeFi thread about this a few days ago, but this really sounds to me like a case where buying a clunker is the smart thing to do, rather than getting further down the bad credit path. He has an ok and very stable income, he just doesn't have much savings or access to credit, right?

He'd be miles ahead if he could manage to get even a few months out of a beater, and then roll the savings into the next semi-beater, and then eventually getting an ok car (either bought outright, or on payments from a reputable dealer). He has the income to rent for a few days if the car breaks down (like he is now), so he has a financial buffer that the poor people who are reliant on the bh/ph lots don't have. The bargaining tip I'd offer in his case, when he spends tomorrow looking at CL cars, is to show up with what cash he has and offer that, even if it a fair bit less than they are asking. For cash in hand and a serious buyer, people will often say "ok."
posted by Forktine at 4:42 AM on November 4, 2011

Nthing buying a cheap car from a private seller (though I'd look in newspaper ads and drive around a little before checking Craigslist) after getting a loan from a credit union.
posted by box at 4:59 AM on November 4, 2011

Definitely check with your local credit unions. Some operate more like banks wrt lending but many are designated Community Development Financial Institutions and they're focused on the kinds of credit-building programs and customized loan underwriting that your friend is looking for. CDFIs are not just credit unions, and your friend might find some options on this list (pdf).
posted by headnsouth at 5:24 AM on November 4, 2011

Basically, anything other than a BHPH dealer is a better option.

Even if he buys a $1,500 clunker, it will be much more reliable than he thinks. Even if he ends up having to call a cab to get to work and pay for some major repairs, he'll still be money ahead compared to a BHPH loan. Figure out what the payment would be from a BHPH and have him put that money into a separate account every month instead. Use the money from that account to pay for anything that goes wrong with the car (taxi, repairs etc) and watch the balance grow. Once he has enough for a big down payment or the $5,000 it will take to buy something much better, trade up.
posted by VTX at 6:27 AM on November 4, 2011

Look into police car auctions of seized cars.
posted by shoesietart at 9:38 AM on November 4, 2011

What about a loan?
posted by tke248 at 1:42 PM on November 4, 2011

Response by poster: Update: Well, we went to a BHPH place last week and they ran his credit and had 4 crappy cars to give him. Needless the say he walked out.

That night his mom texted him after he texted them a week before. He was disowned by them three years ago for being gay and they never spoke. They met the next day and they're back in his life. They are going to help him find a good car as his dad knows some places and people. He hasn't been this happy in a long time. I guess everything does happen for a reason,
posted by daninnj at 8:21 PM on November 10, 2011

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