What is Buy Here Pay Here Car Financing in Canada?

What is Buy Here Pay Here Car Financing in Canada?

Posted on April 15, 2022

We are often asked about ‘buy here pay here’ car financing so we thought it about time we created a blog post about it. Our Paris auto loan team explains what it is, how it works and how it compares to a standard auto loan.

Buy here pay here auto finance

Buy here pay here financing is often offered by dealerships and can be marketed as ‘no credit check loans’. The dealer provides the finance themselves, hence the moniker. It’s a form of auto loan but provided directly by the dealership rather than a third-party lender.

It’s a viable form of car finance in certain situations but won’t be perfect for everyone.

This type of finance is common for used vehicles or lower value vehicles. Dealers use different terms to sell these loans. Typically something like ‘no credit check loans’, ‘no credit no problem loans’ or ‘we finance’ loans. All refer to the fact the dealership itself finances the sale.

Is buy here pay here financing a good idea?

Buy here pay here financing can be a good idea if you have bad credit and couldn’t get a car loan elsewhere. If you don’t want a bad credit car loan, they are a way to buy a car less influenced by your credit score.

However, they are usually more expensive than a bad credit car loan. Typical rates are around 15-20% interest on buy here pay here financing. That can be higher than a good quality bad credit car loan.

This type of finance is also full of fees. Different dealerships run them different ways but expect setup fees, final payment fees and perhaps other fees too. Make sure to check the paperwork carefully before you sign!

Tracker rates

Some buy here pay here dealerships have been known to install trackers on the car you buy. This is more common in the US but has happened in Canada too. The dealer wants to make sure they can repossess the car should they need to and the tracker helps with that.

Buy here pay here financing has a higher rate of defaults than bad credit car loans so dealerships want to protect their investment as much as possible.

Is buy here pay here financing as good as a bad credit car loan?

We do not consider buy here pay here financing as good as a bad credit car loan.

A good auto loan will be cheaper, involve fewer fees and not include giving up your privacy with a tracker. A bad credit car loan can also help you rebuild your credit.

A buy here pay here loan will not usually interact at all with your credit record. That’s one of the selling points. If you want to use your auto loan to help rebuild credit, they won’t help at all.

A bad credit car loan will. Every successful payment you make can incrementally improve your credit score. That’s an advantage too good to ignore!

When you’re ready for a car loan, get in touch with the Caledonia auto loan experts at Northway Ford for great deals on auto finance.

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