Buy Here, Pay Here: What It Is + 7 Biggest Risks

Buy here, pay here car dealerships may have caught your attention if you’re shopping for a new vehicle but don’t have strong enough credit to qualify for a loan. 

This type of vehicle financing is dangerous for several reasons.

As a Certified Financial Education Instructor and former marketer for car dealerships, I always advise against financing an auto through a buy here, pay here (BHPH) dealership, no matter your circumstances. Below, I’ll outline some of the biggest risks with BHPH, especially in 2025, and several alternative financing options to consider.

Table of Contents

1. What is buy here, pay here?
2. What are the risks of buy here, pay here car lots?
   1. Risk 1: High interest rates
   2. Risk 2: Kill switches and repossession
   3. Risk 3: Credit reporting
   4. Risk 4: Limited inventory
   5. Risk 5: More costs
3. Why buy here, pay here is even more dangerous in 2025
   1. Risk 6: Auto tariffs
   2. Risk 7: Dismantling the CFPB
4. Are there any pros of no-credit-check dealerships?
5. Alternatives
6. FAQ

What is buy here, pay here?

Buy here, pay here is a form of vehicle financing offered by car dealerships. The dealership sells the car and offers the financing.

This is different from traditional vehicle financing, wherein you secure a loan through a bank, credit union, or online lender, or have the dealership’s finance department find financing for you.

This second part is crucial. While reputable dealerships have finance departments and offer dealer financing, that really means they work with a network of lenders to secure a loan on your behalf. With BHPH, the dealership is the lender.

Does buy here, pay here check credit?

The main appeal of buy here, pay here dealerships is that they traditionally don’t check your credit to approve you for a loan. That’s why BHPH lenders are also referred to as no-credit-check lenders, meaning borrowers with poor or no credit history can still qualify for financing. 

Instead, buy here, pay here lenders typically only require proof of income.

Because this poses a higher risk to the dealership, they charge a higher interest rate. Loan terms are often shorter (24 to 36 months), but this can vary by lender.

How does buy here, pay here work?

One major appeal of a buy here, pay here dealership is how easy the process is. It’s truly a one-stop shop; you can be in and out with a new set of wheels in a couple of hours.

Here’s how the process works:

1. Check out the cars: Buy here, pay here car lots sell used cars, so you’re limited to whatever’s on their lot the day you visit. Test drive a few to determine which vehicle meets your needs and fits within your budget.
2. Apply for financing: You’ll likely only need proof of income, like a bank statement or pay stub.
3. Read the fine print carefully: Check the contract to see if the lender will use GPS tracking on your vehicle and install a “kill switch” to turn off your car if you default. 
4. Sign the paperwork: If you’re OK with the terms, including the high interest rate, sign the paperwork.
5. Make your down payment: Some BHPH dealerships require a large down payment to minimize their risk.
6. Set yourself up for success: Purchase car insurance right away, and set payment reminders so you never miss a payment. Some buy here, pay here car lots consider borrowers in default even if they are one day late.

What are the risks of buy here, pay here car lots?

Buy here, pay here may seem appealing because you can get a car fast, even with poor credit. But several risks should discourage you from moving forward.

Risk 1: High interest rates

Because buy here, pay here car lots skip credit checks, they frequently charge higher interest rates to minimize their risk. According to a report from the Consumer Financial Protection Bureau (CFPB), BHPH lenders often charge interest rates from 15% to 20%, if not more; banks, on the other hand, lend to subprime borrowers at an average interest rate of 10%.

A higher auto loan rate not only means you’ll spend more over the life of the loan, but it makes each monthly payment more expensive—increasing the likelihood of defaulting.

The table below shows the difference a higher interest rate makes on monthly payments and overall costs for a five-year loan for vehicles of various financed amounts:

	Financed amount	Monthly payment	Total amount paid
10% rate	$3,000	$96	$3,485
20% rate	$3,000	$111	$4,014
10% rate	$5,000	$161	$5,808
20% rate	$5,000	$186	$6,689
10% rate	$7,000	$226	$8,131
20% rate	$7,000	$260	$9,365

Risk 2: Kill switches and repossession

Because loans with higher interest rates mean higher monthly payments, it becomes easier for a cash-strapped borrower to default, according to the CFPB.

And defaulting on a BHPH loan is dangerous. Several lenders use kill switches, which allow them to disable a vehicle if you default.

Imagine expecting to drive your car as you leave your home, only to find it’s disabled.

• A disabled vehicle might prevent you from picking your child up from school and force you to quickly make other arrangements.
• If you can’t drive your car to work, you risk missing out on pay, or even getting fired for being late or a no-show.
• This could prevent you from driving to the hospital in an emergency; instead, you may neglect your medical emergency or pay for an expensive ambulance.

The CFPB has gone after BHPH dealers that have used kill switches, but small, independent dealerships in your community might not be large enough to catch the attention of the nation’s consumer watchdog.

Even worse than kill switches is the risk of repossession. Some buy here, pay here lenders will repossess a vehicle even if you miss one payment by a day. That leaves you without a vehicle—and with major damage to your credit report—while the lender, which is the dealership, can easily turn around and sell the vehicle to someone else.

And because some BHPH lenders require weekly or bimonthly payments, instead of the traditional monthly payment, there are more opportunities to default.

Risk 3: Credit reporting

Borrowers with poor or no credit history should look for a car loan that helps them boost their credit score over time through on-time payments.

However, the CFPB warns that many no-credit-check auto dealers only report negative info, such as late payments, to the credit bureaus. That means their loans can never help; they only hurt your credit score.

Risk 4: Limited inventory

When purchasing from a BHPH car lot, you’re limited to their current inventory of used vehicles.

And if you’re on a tight budget, you likely don’t have extra cash to take a vehicle to a mechanic for an inspection to ensure the car isn’t a lemon—something I traditionally advise when buying a used car.

That means you’re stuck with limited options, with no way to verify the car is worth the asking price.

Risk 5: More costs

Often, buy here, pay here car dealerships require a large down payment when they finance a vehicle without a credit check. Many also have higher loan fees and charge prepayment penalties.

Why buy here, pay here is even more dangerous in 2025

Regardless of political affiliation, it’s important to note that today’s current economic conditions make buy here, pay here loans more dangerous for two primary reasons.

Risk 6: Auto tariffs

President Trump’s ever-changing tariff policies can be hard to follow (literally, as I wrote this article, the White House signaled a change to its auto tariffs). Regardless, rising new vehicle prices due to tariffs will increase demand for used vehicles.

That means you’ll pay more to get a used car from a BHPH dealer, increasing your car payment and the likelihood of default.

Risk 7: Dismantling the CFPB

The CFPB is a nonpartisan consumer watchdog meant to protect consumers against predatory banks, lenders, and other financial institutions. Since its creation less than 15 years ago, the CFPB has saved consumers roughly $20 billion.

The Trump Administration’s move to dismantle the CFPB means predatory lenders, such as BHPH lenders, have more freedom to act without retaliation. The lack of oversight is reason to be cautious.

Are there any pros of no-credit-check dealerships?

The two major appeals to buy here, pay here auto sales are:

• You can get a car with poor or no credit.
• The process is fast and easy.

These benefits never outweigh the cons; if you need a vehicle, consider some of the alternatives to BHPH outlined below.

Alternatives to buy here, pay here dealerships

You may feel like buy here, pay here is your only option if you have subprime or deep subprime credit, but there are always alternatives:

Pay in cash for a cheaper car

BHPH dealers often require a large down payment. Instead of spending that money on a down payment, buy a more affordable car from a more reputable used car dealer, private seller, or service like CarMax or Carvana.

A cheaper car is likely to have more problems, but consider it a temporary solution until you can afford (and qualify for) something better.

Get a cosigner on your loan

Ask a friend or family member to cosign an auto loan. A cosigner with good or excellent credit improves your approval odds, but remember: Missed payments affect their credit score, and if you stop making payments, the lender can go after the cosigner.

To protect your relationship with a cosigner, stay on top of loan payments. Down the road, you can refinance your auto loan to remove the cosigner if your credit has improved.

Wait until your credit improves

If you don’t urgently need a new vehicle (or can get by with public transportation in the meantime), focus on improving your credit score to eventually qualify for a better loan.

Research other bad-credit lenders

BHPH dealers aren’t your only option if you have bad credit. Check out our roundup of the best auto loans for bad credit to find other sources of financing. 

Autopay is our team’s highest-rated lender for bad-credit borrowers.

I usually recommend finding a trusted cosigner, like a family member or close friend with a strong credit profile. Another option is to borrow a modest amount of cash from someone you trust who has the means to help, so you can buy a vehicle outright. If it’s a loan rather than a gift, make sure to treat it like any formal agreement: Agree on repayment terms, and put everything in writing with a simple promissory note to keep things clear. 

And if you don’t need the car right away, it might be wise to focus on saving up for a reasonably priced used vehicle while working on rebuilding your credit.

FAQ

Can you get denied at a buy here, pay here lot?

Yes, you can still be denied at a BHPH dealership. Although these dealerships are known for approving buyers with bad or no credit, you typically still need to show that you have enough income to make your payments. If your income is too low, your job is unstable, or you can’t provide the required documents, the dealer may deny your application.

Do buy here, pay here lots require full coverage?

Yes, most buy here, pay here lots require full coverage insurance. Because the dealership remains the legal owner of the car until you finish paying off the loan, it wants to protect its investment. This usually means you’ll need to carry collision and comprehensive coverage, which can significantly increase your monthly costs.

Do you need a down payment with buy here, pay here?

Many buy here, pay here lots require a down payment, although the amount can vary. Some advertise “no down payment” deals, but in practice, it’s common to need a few hundred to a few thousand dollars upfront. A larger down payment may also improve your chances of approval or lower your monthly payment.

Do you need proof of income for buy here, pay here?

Yes, proof of income is usually required at a BHPH dealership. Since these dealers finance the cars, they want to ensure you have enough regular income to afford the payments. You’ll typically need to provide recent pay stubs, bank statements, or other documentation showing steady income.