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Hidden Costs of Buy Here Pay Here

Many Buy Here Pay Here dealerships originated in the 1970s and ‘80s, when many people were struggling to obtain credit and unemployment was on the rise. Instead of asking customers to pay cash on the spot, some automobile dealers began related finance companies (RFCs) to give loans to consumers who couldn’t get loan approval from a bank. This method of purchasing a car is known as Buy Here Pay Here. The customer (who typically has a bad credit history) is extended credit to purchase a vehicle by the automobile dealership. Sounds great, right? Not so fast . . . There are many hidden costs of Buy Here Pay Here dealerships. Before you sign up for a car at one of these lots, be sure to research both Buy Here Pay Here dealerships and their alternatives.

Hidden Costs of Buy Here Pay Here

sleazy car sales guy

  1. High Interest Rates. Buy Here Pay Here lots are known to have very high interest rates under very bad terms. Loans often start around 20% and can escalate to as high as 30-35%.
  2. Marked-Up Costs. Many of these cars are bought very cheaply at auctions and then marked up 100-200%. The cost of the car is often determined by how much the customer can pay, not the true value of the vehicle. Additionally, most Buy Here Pay Here vehicles come with three-, four-, or five-year loans. By the time the consumer has fully paid for their vehicle, they’ve typically paid over four times the actual value of the car.
  3. No Warranty. Some dealerships don’t offer warranties, so the customer is responsible for all needed repairs. If the dealership does offer a warranty, it’s not unusual for it to have a very high deductible. So when a customer’s car breaks down, they will likely struggle to pay for both the repairs and their regular payments.
  4. High Charges for Late Payments. If you’re having a hard month and you aren’t able to make a payment on time, expect a very large late fee. In some cases, your car could even be repossessed!
  5. Sales Tax. In addition to your regular payments, your one-time down payment, and interest, you’re expected to pay sales tax as well. All of these costs can really add up!

Why You Should Consider Rent/Lease to Own Instead

When you’re on a tight budget, every penny counts. And when it comes to purchasing a car, we’re talking about a lot more than pennies! If you need a car quickly but you have bad credit, consider a buy/lease-to-own car instead. You can avoid upfront sales tax, property tax, and high interest rates as well. It’s simply a smarter solution.

Are you interested in renting-to-own or leasing a car? If so, be sure to check out Auto By Rent, the largest rent-to-own/lease auto dealer in Missouri and Tennessee. We can help you secure a quality vehicle regardless of your credit history. To learn more about our services, please click here for a free quote or contact the location nearest to you:

North Springfield: 417-447-7979

South Springfield: 417-877-2001

Joplin: 417-553-0555

Marshfield: 417-859-6363

Rogersville: 417-753-3669

Chattanooga: 423-553-8200

We look forward to hearing from you!