A Brief History of Buy Here Pay Here

family smiles after buying a car

It’s easier to buy a car at a BHPH dealer than getting a car loan through traditional lenders, especially if you’ve had past financial problems.

There is a history or a story behind everything: a country, a culture, a museum, a building, and even the simple everyday objects. Some are interesting such as those of adventure or war, and some are boring or dull of tradition and evolution of tools.

Well just like everything else there is also a history behind businesses. Yes I know, you never really think about the history of a business, unless by chance you’re an entrepreneur yourself. Believe it or not buy here pay here car dealers have a history of their own as well.

Buy here pay here used car lots started mainly in the 1970’s when everyone had to save their money and loans where extremely hard to get from the banks; unemployment rates were increasing and the economy was trying to change.

People couldn’t afford to buy a car with cash or were unwilling to pay the rising prices for a new purchase. Dealers who were still wanting to sell automobiles where finding it increasingly difficult to do so.

In several cases, when the bank would deny the consumer for a loan the automobile dealer would start a RFC (related finance company) so that the consumer could be approved. This was a leap of faith or a very bold step in a way for dealers and the banking businesses. The RFC was beneficial to the consumer as well as the dealer because this lessened the risk of the sale and the financing to go wrong or “go south”.

Buy here car lots were not easy to run. When buying used cars to sell, most dealers had a floor line of credit. This line of credit was secured with some sort of collateral such as real estate with either a bank or the auction house Manheim that was owned by Cox Enterprises.

With most floor lines they required the dealer to pay off the automobile in full within 90 days. This proved to be difficult because when the dealer was able to sell the car it meant that the financing companies would have to quickly put together the cash for the loan so that the dealer had the funds to pay off the car.

It became more difficult with trying to sell a car for the best price to the consumers needing a cheap but reliable automobile. This was often called a “Cash Crunch” and it was the primary thing that put a buy here pay here used car dealership out of business. Some used car dealers prevailed though and were able to survive the “cash crunch” and still produce reliable used cars to their consumers.

As the saving and loan crisis started to dissolve the buy here pay here businesses turned their focus to people with bad credit or lower credit ratings then the average person, making a buy here pay here known as “bad credit approval.” As the dealership saw the buy here pay here business increasing more, the need for lending and software systems increased as well.

Dealers went into the technological era allowing for their businesses to spread even further and grow larger. This in turn gave the buy here pay here dealers a larger selection of vehicles to provide on their lots.

shutterstock_157283393-300x200Buy here pay here lots still work with several financing companies. Selling used cars was a buy here pay here lots’ profession so they were obviously good at selling but they were also good at providing services and repairing cars.

The lots work with each person that walks in to try and get the best deal they can for them with the lowest monthly payment that is possible, although buy here pay here interest rates tend to be higher than other lenders because there’s more risk involved for the dealer. A buy here pay here car is no different than at other lots, but the financing is.

Buy Here Pay Here dealerships were made nearly 45 years ago in the hopes to help the people who couldn’t afford to buy a new car, or even a used car, with cash.

These dealerships still help the people with little or limited funds, but they have grown to help those who have not so good credit as well.

The buy here pay here industry is a difficult one but they have been helping the lower and middle class of society since the 1970’s and will continue to help the people for many decades to come, at least until our robotic overlords assume control.

 

Back to top