 TITLE: How Buy Here, Pay Here Dealer Financing Works CONTENT: What Is a Buy Here, Pay Here Dealership?\n----------------------------------------\nWhen you sign a contract to buy a car with a traditional car dealership, it passes the contract on to an auto lender, which provides a loan for the purchase. With a buy here, pay here (BHPH) dealership, however, the dealer sells and finances the cars on its lot.\nBHPH dealerships specialize in working with people who have bad credit or no credit history at all. As a result, they can provide an opportunity that some borrowers will have a hard time finding anywhere else.\nBefore you consider a BHPH dealer, though, it's important to consider both the benefits and drawbacks of doing so.\n##### Pros\n*   **Credit-challenged borrowers can get approved**: If your credit is in bad shape or you haven't had the chance to build a credit history, you may think financing a car through a dealership is out of the question. With a BHPH dealership, however, approval standards are lower than what you'll find with traditional lenders.\n*   **The process is simple**: When you buy a car from a BHPH dealer, you're done with the entire buying and financing process when you drive off the lot. With traditional dealerships, it can still take a while to complete the loan process, especially if you have bad credit.\n##### Cons\n*   **Costs are high**: Because BHPH dealers work exclusively with people with bad or no credit, they tend to charge higher rates than traditional auto lenders that have a mix of borrowers with good and bad credit. Depending on the dealer, you can expect to pay an interest rate as high as the maximum rate allowed by law in your state. Some dealerships also add a slew of hidden fees to the contract, driving up your total costs.\n*   **Selection is limited**: Instead of picking a car and then talking about financing, BHPH dealerships first determine your eligibility, then show you which cars you qualify for. This means you might have fewer options than you would with a traditional dealer.\n*   **Expect to make a large down payment**: Working with bad-credit borrowers carries a certain amount of risk. To help mitigate that risk, BHPH dealers typically require a larger down payment than a traditional dealership might expect. If you don't have much cash on hand, it will limit your choice of cars.\n*   **There's a high chance of repossession**: Both BHPH dealerships and traditional auto lenders can repossess your car if you stop making payments. But with a BHPH dealership, you may get less leeway if you're struggling to keep up on payments. END