DEFINITION of 'Buy Here Pay Here'

Used car dealers who also handle vehicle financing for the buyer, as a result of which the buyer ends up buying from and making monthly payments to the dealership. Buy Here Pay Here (BHPH) dealers generally sell older cars with high mileage, usually to people with poor credit scores. BHPH dealers offer vehicle loans at very high interest rates that can be in the teens or higher. The term “Buy Here Pay Here” may arise from the fact that the buyer often has to make monthly loan payments at the dealer’s premises – in cash or through a money order – since people with impaired credit histories are viewed as high credit risks.

BREAKING DOWN 'Buy Here Pay Here'

Because of the significantly higher risk of default, a car purchased from a BHPH dealer will typically have an electronic tracking device and vehicle immobilizer installed in it. The tracking device is used to locate the car if it needs to be repossessed in the event of loan non-payment by the buyer, while the immobilizer allows the dealer to shut down the ignition if the buyer tries to escape with the car.

BHPH dealers are often accused of employing high-pressure sales tactics that can result in the dealer making a huge profit at the expense of the buyer. As this aggression often also extends to repossessing of the car if the loan payments are late, prospective buyers should clarify the dealer’s policy with regard to late payments.

One abuse that is reportedly endemic to BHPH dealers is “churning,” which involves selling the same car numerous times in order to boost profits. This practice is made possible by the relatively high rate of repossession by BHPH dealers.

In September 2012, California Governor Jerry Brown signed into law two bills regulating BHPH dealers. The laws require BHPH dealers to provide warranties on every car sold in California, and also require such dealers to post fair-market values on their vehicles and give customers more flexibility to make payments.

RELATED TERMS
  1. Dealer Financing

    Dealer financing refers to loans originated by a retailer that ...
  2. Dealer Market

    A dealer market is a financial market mechanism wherein multiple ...
  3. Dealer Incentive

    A dealer incentive is a financial inducement used by manufacturers ...
  4. Purchase and Resale Agreements ...

    An arrangement between the Bank of Canada and dealers whereby ...
  5. Dealer Bank

    Dealers banks are commercial banks, registered with the Municipal ...
  6. Note Auction

    A note auction is a formal bidding process that is scheduled ...
Related Articles
  1. Personal Finance

    Top Tips For Year-End Car Buying

    'Tis the season to purchase new wheels, and these tips will help you drive away with the best price.
  2. Investing

    How To Get A Good Deal On A Used Car

    Why are prices quoted by dealers and private sellers so disparate? Read on to find out how to use that info to your benefit when buying a used car.
  3. Managing Wealth

    5 Tips For Dealing With Car Dealers

    Negotiating with car salesmen becomes a lot easier if you follow these five easy steps.
  4. Personal Finance

    How to Get the Best Price on a New Car

    Learn tips to help you get the best price on a new car without the hassle of haggling.
  5. Managing Wealth

    4 Ways to Get the Best Deal on a Car Lease

    Car buyers typically negotiate when purchasing a vehicle, but many don't negotiate when leasing a car. There are several ways to save if you ask.
  6. Personal Finance

    7 Mistakes to Avoid When Buying a Used Car

    Understand the benefits of buying a used car. Learn about seven mistakes to avoid before making a used car purchase.
  7. Personal Finance

    Used Car Shopping: How to Avoid a Lemon

    Being prepared before buying will save you thousands in the long run.
  8. Investing

    Gold Scams To Watch Out For

    Buying and selling gold can be extremely lucrative, but there are also many risks associated with gold. Here are some useful tips.
RELATED FAQS
  1. What are the differences between installment sales and credit sales?

    Determine the differences between credit sales and installment sales, which businesses often offer their customers for deferred ... Read Answer >>
  2. What's the best way to finance a car?

    The best ways to finance an automobile purchase include a hire purchase and self-financing. Read Answer >>
Trading Center