Inhouse Motoring Finance - Financial Business

In-house motoring finance, also known as “buy here, pay here” (BHPH) financing, offers car loans directly from the dealership itself, rather than through a traditional bank, credit union, or finance company. This can be an appealing option for individuals who face challenges securing auto loans from conventional lenders, primarily those with poor credit histories or limited credit scores.

The primary advantage of in-house financing is its accessibility. Dealerships offering BHPH loans typically have more lenient credit requirements. They often focus more on a borrower’s ability to make regular payments than their creditworthiness. This makes it possible for people with bankruptcies, repossessions, or multiple late payments to obtain a vehicle.

However, this accessibility comes at a cost. In-house finance loans generally carry significantly higher interest rates compared to traditional auto loans. This is because BHPH dealerships are taking on a greater risk by lending to borrowers with a higher probability of default. These elevated interest rates can substantially increase the total cost of the vehicle over the loan term. Additionally, loan terms might be shorter, resulting in higher monthly payments.

Another key difference lies in the vehicle selection. BHPH dealerships often specialize in selling older, used vehicles with higher mileage. While this can provide an affordable option, it also means the borrower might face increased maintenance and repair costs in the future. It’s crucial to carefully inspect the vehicle and ideally have it assessed by an independent mechanic before committing to the purchase.

Dealerships offering in-house financing may implement stricter repossession policies. Missing even a single payment can quickly lead to the vehicle being repossessed. The borrower is then left without transportation and still potentially responsible for the remaining balance of the loan, even after the car is sold at auction.

It’s crucial to understand that while in-house financing can provide immediate transportation, it’s often not a long-term solution for improving credit. Some BHPH dealerships do not report payment history to credit bureaus, meaning on-time payments will not contribute to rebuilding credit. Before committing, inquire whether the dealership reports to credit agencies.

Before opting for in-house financing, it’s advisable to explore all other available options. Consider improving your credit score by paying down existing debt and ensuring all bills are paid on time. Shop around for the best possible loan terms from banks, credit unions, and online lenders. Explore co-signing options with a trusted individual with good credit. Ultimately, while in-house financing can provide a temporary solution, it’s important to carefully weigh the pros and cons and fully understand the financial implications before committing.