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.

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