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Buy Here Pay Here (BHPH): What Is It & How Does It Work?

Last updated 04/19/2023 by

Emma Dillon

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Buy here pay here dealerships are car dealerships that sell affordable, used cars and offer loans to buyers. Buy here pay here dealerships do not perform credit checks, so they appeal to buyers with poor credit. However, these dealers offer risky high-interest loans, so they’re usually a last resort for buyers.
If your credit score is less than stellar but you need a loan to buy a new or used car, you may find that few lenders want to work with you. People in this situation sometimes turn to buy here pay here (BHPH) car dealerships, where the dealer lends them the money to buy a used car.
However, there are pros and cons to this particular car-buying process that are important to keep in mind. Keep reading to learn all you need to know about the buy here pay here model.

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What is BHPH?

“Buy here pay here” refers to auto dealers that offer in-house financing rather than third-party financing in their sales. In other words, buy here pay here dealerships find you a car and lend you the money to pay for it.
BHPH dealers may be the only option for people with bad credit who likely will not be approved for a traditional car loan from a bank or credit union. These sellers sell pre-owned cars, often with high mileage.

How BHPH loans work

Proof of employment and residence are often enough to secure a down-payment loan with BHPH dealers; no proof of credit history is needed. Loan payments to the dealership are not monthly, as would be the case with a typical auto loan. They’re usually due every two weeks or even every week.
BHPH dealers use their own financing system and process instead of a third party. BHPH dealers are sometimes called “bad credit no credit” dealerships. You might see signs outside them that say “we finance,” or something similar. Since these sellers don’t check credit, it’s much easier for borrowers to secure a loan and purchase a vehicle.

BHPH buyers

Buyers with low credit scores or poor credit histories are the most likely to buy from car dealers with a BHPH option. Since you need a good credit score to secure a traditional auto loan, buyers with low scores sometimes turn to BHPH dealers.
In this case, “low” means a score of around 500 or below. Because of the high interest rates and risk of causing further damage to your credit, you shouldn’t buy from a BHPH dealership if you can afford not to.

Pro Tip

If you have bad credit, you don’t have to take the first BHPH loan on offer. Instead, check out our guide to the best auto loans for buying a used car, some of which are available to those with low credit scores. You can also take steps to improve your credit score so you can get a traditional loan with better terms.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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Pros and cons of BHPH loans

Tana Williams, founder of Debt Free Forties, says there is a potential upside to buying from BHPH dealerships. “If you make your payments on time, BHPH financing can help build or improve your credit score,” she says. “This is because making on-time payments on a loan demonstrates responsible credit behavior and can boost your creditworthiness.”
Williams says some BHPH dealerships do not report to credit bureaus at all, so those will not help you improve your score, even if you make timely payments. And if you do find a dealership that reports to the credit bureaus, it could potentially have a negative aspect as well. “If you miss a payment or default on your BHPH loan, it can hurt your credit score,” she says.
Here is a breakdown of the benefits and the drawbacks of BHPH loans.
  • The dealer can offer various flexible loan terms, like no-interest financing periods and no credit checks for loans.
  • You can secure a loan even if you have bad credit.
  • You can potentially improve your credit score if you make your payments on time.
  • Since the dealership needs to mitigate risks as much as possible, it’s much more likely to repossess vehicles it sells. Missing one payment is enough for a BHPH dealer to repossess a vehicle.
  • They also have higher interest rates than banks. BHPH sellers offer loans that will end up costing more in the long run than a deal with a traditional lender would.
  • The quality of the cars for sale is also generally poor, so you need to make sure there’s a warranty in place to protect you after you buy. You also likely won’t get a vehicle history report.

Can you return a car to a BHPH dealer?

Depending on the dealership or dealer you bought your car from, returns could either be complicated or quite simple. Easy Auto, for example, offers a three-day return or exchange policy (see below). Other used car dealerships may not be so flexible.
Sometimes, trying to return a BHPH vehicle can lead to serious damage to your credit score. Sellers might report your missed payment to credit bureaus, take you to collections, or repossess the car. Any of these issues can lower your score.
You can’t just return a car you don’t like either. If you return a vehicle to a dealer with the intention of stopping car payments (for whatever reason), the car will be considered “repossessed.” And, unfortunately, credit bureaus don’t discern between voluntary and forced repossession, meaning the repossession will still damage your credit score.

How do you get rid of a BHPH car?

If you just don’t like the car but it still works, you can always sell the vehicle or trade it in for a different car. However, if the trade-in value of the car is less than the remaining loan balance, you’ll have to repay whatever the trade-in value doesn’t cover.
Depending on the lender, you may be able to include the remaining balance in your new loan. That said, this will increase the new loan balance, so make sure it’s your best option before doing so.

Pro Tip

Make sure you ask about the dealer’s policy on late payments. Double-check that important policies like this are explicitly stated in the auto loan agreement before signing any contracts. Also, make sure you know if the dealer offers customers a warranty on its cars.


What is the California buy-here-pay-here warranty?

If you live in California, you may benefit from a law that went into effect in 2013. It requires that BHPH dealers in California must provide a specific warranty on the used cars they sell. That warranty must cover at least 1,000 miles or 30 days, whichever comes first. This is required no matter how old the used car is, how many miles it already has on it, or how much repair work has been done to it. This even applies to used cars being sold with the caveat “as is.”
The goal of this law is to keep used car sellers from knowingly selling cars that will drive off the lot and fall apart immediately. It disincentivizes dishonest business practices while protecting car buyers at the same time.

What is Easy Auto’s return policy?

Easy Auto is an online BHPH dealership that streamlines the car-buying and financing process. You can shop for a car, secure financing, and purchase it all on one platform, with no credit check needed.
Easy Auto has a more robust warranty than the baseline required by California law. The Easy Auto warranty covers the vehicles’ more specific elements, including the engine and transmission, electrical system, and more.
Easy Auto’s return policy is straightforward: if you decide you don’t like your car, you can cancel your purchase or exchange it for a different car within three days of it being delivered to you. If you return the car, you will be refunded everything you paid up until the day the car is returned, minus the transfer fee.

Key Takeaways

  • Buy here pay here dealerships sell vehicles to customers with poor credit or no credit and act as both lender and seller.
  • BHPH dealers are appealing because they do not perform credit checks before lending to customers. That said, the interest rates on the loans they offer are extremely high.
  • It can be risky to take out loans from these dealerships, so weigh all your options before going through with it.
  • If you make all of your payments on time, a BHPH loan could help you improve your credit score. However, if you have any late or missed payments, it could lower your credit score even further.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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