This is quite a common term used in automobile deals. Making deals that involve quite a bit of money is not an easy task. This is the main reason why you have to take care of every detail so that any mistake can be avoided. Let us get back to the main point under consideration i.e. buy here pay here. When you buy a car or any other automobile and the financing is done at the same place where you are buying from, it is called buy here pay here. Usually, the financing is done by some bank not the dealer and that is why this situation is a bit different from the usual purchasing activity. Let us talk a bit more about it.

Why is it needed?

Since the banks and other institutions are already there, what is the need for a buy here pay here facility? When you get loans to buy something or any other purpose, a very important concept is involved in this process that is called a credit score. Whenever you are guaranteed a loan for something, the bank sets a period for you to repay the loan. The extent to which you follow the regulations of repaying your loans defines your credit score.

Suppose you miss to repay the loan in a specified duration of time, your credit score will be affected badly due to this. So, a bad credit score means you haven’t paid the loan in time or you have violated other regulations set by the bank. Whenever you ask for a loan from some bank, they look at your credit score. If the credit score is not good, the banks find it difficult to sanction your loan this time.

And if a person like that wants to buy a vehicle and looking for financers, buy here pay here is the most obvious solution. Since that person won’t find any help from banks, there is nothing more they can do other than consider the dealers for financing their vehicles.

The working of buy here pay here model

Now that you are well aware of the fundamentals involved in this process, it is time to talk about other important concepts involved in this process. Here, we are going to talk about the way this model works. Since automotive companies are highly focused on improving their sales, they usually address the majority of problems that their target customers might face. In the majority of cases, the automobile companies delegate the portion to money to be financed to an external agency.

Some manufacturers have affiliated the dealerships for this purpose. So, the customers will get the things easily done by the manufacturing brands themselves. While in other cases, you might need to rely on external agencies or third-party institutions for finance purposes. BHPH (buy here pay here) is an entirely different concept as the dealers provide lease financing facilities by themselves. It is definitely a benefit on the consumers’ part but there are some risks for the dealers. First, the dealers might face some cash flow issues and their problems might get severe due to the increased risk of default.

The benefit that dealers avail themselves of here is they enjoy the interest coming from the customers. But there are some risks associated with this deal as well.

Final words