The Truth About In House Financing for Car Loans

by Jim Klark⁽²⁾
Car Buying How to and More!

There is a little known option for buying a car with bad credit that has been growing in popularity. You won’t see it advertised on television or hear about it in social situations because it refers to a condition that is embarrassing to most people. The option to which I refer is In House Financing for Car Loans. This is a solution that can be a blessing for people that have endured a life altering experience and need to purchase an automobile. Rebuilding your credit is easier said than done and it could take you several years before your credit score could return to a level than would qualify you for an auto loan.

In house financing is where a car dealer retails an automobile to the customer and provides the financing for their purchase. Very different from the conventional method of arranging a car loan through a third party lender such as a bank or auto manufacturer’s lending division. All of the terms, charges, fees and stipulations are dictated by the selling dealer. The conditions are also very different from your standard auto loan in that the payments are made at the dealership on a weekly or every other week schedule.

Some of the truths about in house financing is that the dealership is bound by few regulations expect where completing the paperwork is concerned. The installment auto loan provided by the dealer is more of a contract between two people, the car buyer/lender and the owner of the buy here pay here dealership. The owners of these types of establishments feel that they are taking a substantial risk which causes them to be very cautious about who they finance and they expect to be paid handsomely for that risk.

There are several ways that they make money from your transaction and the first is on the price of the car being purchased. They offer used vehicles that typically have high miles, but are well taken care of because they are trying to keep their costs low. These vehicles are usually in good shape because they know if they sell you a car that has problems you will stop making the payments. You already have bad credit so why pay for a vehicle that does not operate.

The second way that they make money is to charge a very high rate of interest on your loan. I have heard of annual percentage rates of 24% or higher. That may sound crazy to someone with good credit, but if you need a car and you can afford the payments you are usually glad to get the in house financing at any interest rate. Besides the rate some dealers charge other fees with to help grow their bottom line. These could include a dealer prep fee, loan origination fee or loan insurance all of which can increase their profits.

Entering into an agreement with a buy here pay here dealer that offers in house financing for car loans should be cautiously contemplated. Before you sign on the line you should read and understand every word and number that is written on your paperwork. Make sure you thoroughly understand the terms and conditions of the car loan and familiarize yourself with the dealer’s late payment policy. No matter how bad your credit may be you should know all of the risks and situations than can potentially come back to haunt you later.

This article was authored by Jim Klark that is a long time veteran of the auto industry. He has more information about buying a car with bad credit and Buy Here Pay Here dealerships at his website BuyHerePayHereVehicles.com.

Article submitted Wednesday, May 11, 2011 & read 49 times.

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