Buy Here, Pay Here

Kirstie_H

Let's get some insight on this facet of the automotive industry. Questions or comments? Start here!

 

kirstie_h

Roving Host

Host, Future Vehicles & Smart Shopper discussions

driftracer

but I play one on TV. One of my best friends from high school has one of the most successful BHPH businesses (4 lots) that I've ever seen. He has over 1,000 vehicles worth of payments rolling at any one time, started with 6 cars and a 14ft travel trailer on a gravel lot.

 

There are many stereotypes that fit these guys, and in my buddy's case, some that don't.

  

Yes, you have to be thick-skinned. Yes, you have to be fairly treacherous. But, you also have to be very well set, financially, and have to have a good eye for vehicles, plus a reliable mechanic to make sure it all runs smoothly from before the sale, until the car is paid off.

  

This is a business I will probably get into, although nowhere near my buddy's "area", when I retire.

  

Call it what you may, and talk badly about these highway robbers...but you have to understand that there is a HUGE market for this service. People need decent transportation, and have, themselves, ruined any chance of going to a dealer and buying a new or used car with conventional financing.

  

It's all about personal responsibility - if you pay your bills and honor your word and obligations, you can buy anything you want, from anyone you want, with either cash, or a loan from any financial establishment you want.

  

If you DON'T do all of the above, then you can't do any of the above, and unless you want to scrape up $300 for a rusted up beater, if you MUST have something nicer, or have to pose with your bling-bling (that's a majority of the business in BHPH), you have the choice of BHPH.

  

From a credit perspective, my buddy can report your account to the various credit bureaus, and will when you pay it well, or if you repo.

  

MOST BHPH dealers, though, don't go to the additional cost or trouble to report to the credit bureaus - simply because, in most cases, they would be doing their customers a favor, and most won't.

qbrozen

ok, so i saw your original request for this topic, drift, and since you mentioned that many folks might not know they are dealing with a BHPH lot, can you specify how to spot one? For instance, I think I shopped at one last month only because they offered their own financing, but the prices were pretty good, while I was under the impression that a BHPH was typically overpriced. Is this not true?

driftracer

a big "We Finance" sign - many BHPH dealers don't use the term "Buy Here, Pay Here"....although that's exactly what the consumer does.

 

Prices may be fairly in line, until you figure out the title status for that assumedly clean and decent mileage vehicle - these are perfect places for flood, salvage, and total title cars, simply because the consumer has no recourse, and there's no lender or warranty company to certify the car to as a "clean, sellable" retail unit, as there are with a typical car dealership using GMAC and GMPP.

 

Oh, and flood, salvage, and total (and repurchased lemon!) vehicles are CHEAP at the auctions and main line dealers won't touch them.

Kirstie_H

I always assumed that the places advertising weekly payments were this type of dealership - for those with poor credit, similar to the rent-to-own furniture companies.

 

I know there are other reasons for renting or paying weekly, but are these likely to be BHPH dealerships? I've never seen any other finance company offering weekly payments.

 

kirstie_h

Roving Host

Host, Future Vehicles & Smart Shopper discussions

driftracer

they want to see your smiling face, and hopefully the car, every week, so they know you haven't skipped town.

stickguy

Some lots still have the big buy here, pay here banners. Probably less confusing to the majority of their customers, that are looking for just that!

 

As long as the dealer is honest (that is, the cars are legit used cars), and the prices are market correct, than BHPH makes sense as an alternative way to finance. Someone has to service the market for people that can't get normal financing.

 

It is also nice to report the good payers, but I'm sure some dealers don't, since it would potentially cut into their client base.

 

So, I have a problem with the repo shark types that are basically preying on people without options 9for whatever reason), but not with the whole BHPH concept.

 

There are quite a few of the sleazy places in my area (across the river from Phila, Drift will know where!), but also some legit ones (one in Westhampton comes to mind).

 

I wonder how many people actually complete the payments and end up owning the car?

gkbenji

is buy cars from individuals that other lots won't take, old or high mileage, if you're not trading or don't want to sell yourself for some reason (e.g. need the cash *now*). These don't necessarily have to be salvage or otherwise "tarnished" cars.

 

For example, I wasn't sure if I wanted to trade in my 14-year old Jetta with 131K miles, or sell it myself. I shopped the car around to see what it might be worth. About the only guys who would even make an offer on a car that old were BHPH dealers, so I ended up getting a good idea of what it was worth to them. Of course, I got over $1000 more than that by finally selling myself, but if I'd needed to sell it right away I knew where I could take it--as well as having a number to base ACV trade-in value if I'd gone that route instead.

rroyce10

...... If they're paying weekly or twice a month, you can bet it's a BHPH lot ...

 

            That said, it doesn't make them a bad store, most of the BHPH lots do 75/85%+ of their "real" business on the Retail side and most of the time the BHPH stuff is just a small portion of their business .. most sell some nice vehicles and have a good reputation .. it's awful hard to stay in the BHPH business when your not selling anything else and your depending on Billy Bob to make his payments after his 2nd bankruptcy ........ Yikes.!

 

                          Terry

Kirstie_H

I had one of my best shopping experiences at a BHPH lot - no new cars, only used. I needed a used vehicle under 10K, and they had a Protege that had exactly the features I wanted. At the time, I was driving a really old LeBaron that barely ran, which I suspect normal dealerships wouldn't have touched. They were happy to take it off my hands for $800, no problem. I imagine this transaction would have been a lot more hassle for a "regular" dealership.

turboshadow

Mrs. Turboshadow and I disagree completely on the subject of BHPH, furniture rental, payday loans, title loans, and other places that the local news media have dubbed "predatory lenders." My take on the deal is that the people that use these places actually have no recourse because of bad credit, or are young and have yet to establish credit. Sure, it seems unfair, but there is an aweful high number of people who default on them as well. As one ex-car dealer told me, "Bad credit is expensive."

 

I am leery of buying cars from these places, though. Even though I obtained finacing thru my credit union, I didn't look at any cars from the BHPH lots; I was afraid of the aforementioned lemons, salvages, and flood cars.

 

Turboshadow

driftracer

"BHPH, furniture rental, payday loans, title loans, and other places that the local news media have dubbed "predatory lenders"

 

BHPH and furniture rental, though, however overpriced and repo-threatening, actually provide a service where consumers buy a product that they can pay off and keep.

 

When I was a young buck, just returning from doing my first 5 years in the AF overseas, at 23 I had no credit. We bought furniture and a washer and dryer through Rent-A-Center or someplace like it in Abilene, TX, paid it off and kept it until 1994. Kept the washer/dryer until 1999.

 

Now, the payday loans? OMG....these folks take people who already can't handle their money, loan them more money, and charge them up to 100% interest...in many cases, you agree to allow them to GARNISH your wages...even BHPH or furniture rental places can't do that.

 

The title loan thing? That one's entertaining - you let them hold the title to your $3,000 car while they loan you $500 at sky-high interest. You don't pay back the bucks, they take your car - in many cases, they keep your car in a lot until it's paid off - no risk for the lender, for sure...

 

"Bad credit is expensive."

 

Very true - and it's no one's fault but the person with the credit history, save a few circumstances with medical bills or natural disasters.

 

Given NORMAL bad credit though, I don't feel sorry for anyone - you put your name on a piece of paper syaing you'd pay some money by a given date - you didn't do that - your credit now sucks.

 

Tough cookies. It's called personal responsibility, I have no sympathy, and you'd better bet that there'll be a "Big Jim's Buy Here Pay Here, We Finance Luxury Automotobiles and SUVs, pickup trucks and family cars" coming soon to a corner lot near you...

stickguy

there is a small, family owned lot in my area that has been there a long time (I used to live around the corner). Dad buys the cars, mom runs the lot type of place.

 

Anyway, very respectable, good reputation. All nice cars, generally 5-8 years old IIRC (lots of '98 Camrys, Grand Ams, Buick, that type of thing). All clean, normal mileage cars, most of which come from local new car dealers. They all get a good going over by the mechanic.

 

Anyway, basic transportation, and if I needed this type of car wouldn't hesitate to go there.

 

point of the story is that they offer some (or most) as either straight purchases, or BHPH ($500 - $1500 down usually, then $50/week). They quote both ways, and the prices from what I can tell seem to be decent. But, I don't get any sense that they are into any "predatory" lending practices. Rather, it is a way for them to move cars to their target audience.

 

Plus, by getting a decent % down, they have some of their exposure covered, but you don't see the same cars constantly being recycled on the lot.

 

IMO, BHPH is capitalism at it's best. A need exists, it gets filled.

kyfdx

If these guys can scrape up $500-$1500 for a downpayment, why can't they buy a car the old-fashioned way?

 

Most guys I know that would have to buy a car on a payday payment plan, don't have enough money to buy lunch on the day before payday...

turboshadow

Hot deals on Lincoln Blackwood's, Pontiac Azteks, and Chevy SSRs!!! See the man under the big tent!!!! See my exclamtion marks!!!!!

 

The ex-car dealer that gave me the "Bad credit is expensive" quote said his gravel BHPH lot was super lucrative. Oddly enough, I met him while I was teaching in prison (long, strange tale). Crimes unrelated to profession.

 

Turboshadow

driftracer

what you have in the car, unless you're dealing with a repeat customer with a good track record.

 

The cycling of cars is where the money is made.

 

Let's say you buy a fair shape 120,000 mile 8 year old Grand Am. You pay $1200 for it, and put on brakes and tires, and you have $1600 in it.

 

You accept a $1500 down payment on it, and $50 a week.

 

After a month of payments, the new owner comes up short and you pop the car. You now own it for free, having collected $1700 on it. If they want it back, they can pay a $250 (pre-agreed) reposession fee, plus any payments in arrears. They take it back, and you're now at least $250 in the black on this car.

 

It repos again a month later, and the car is now $350 in the black, even though it's reposessed and it's back on your lot.

 

You sell it again, taking $1,000 down. You're now showing a $1,350 profit on it, and in addition to that money, everything else is gravy.

 

This one pays it all the way out over 18 months. That's $3,600 in payments, plus the down payment. The car has netted you $4,850 in 18 months.

 

Now - multiply that number by 100-200, depending on how many cars you have burning gas and bringing in cash during any one given week, and you can see the profit potential. Even if you only average $3,000 income on each unit, selling 25 cars a week and having 200 accounts at any one time...the numbers are staggering.

 

I'm on pain meds, so I'm not EVEN going to try to do the math. Where's my engineer student son and his fancy dandy calculator when I need him?

driftracer

I think we have a marketing scheme here!

 

The BEST buy here pay here cars are Tauruses, Sables, Crown Vics, Buick LeSabres, and Chevy Luminas/Impalas/Malibus. Oh, and Neons, Focuses, Escorts.

 

Miled up Explorers, especially XLTs, Eddie Bauers, and Limiteds command crazy money, with folks willing to get payday loans and title loans in order to come up with the $3,000 down payment needed to roll one of these status symbols.

turboshadow

That was exactly the way it was explained to me!

 

Turboshadow

driftracer

rest is gravy.

 

Big Jim wants a boat, a couple of jet skis, two motorcycles...and a big house - I want to thank, in advance, all those folks who didn't pay their bills and can't get bought through GMAC, for doing business with me.

danf1

Those numbers got my adrenaline going.

driftracer

from high school started this in 1988, after several weak years of working at the mom and pop Ford store that we both worked at in high school.

 

He's now worth $4 million in readily available assets and is getting ready to partner with the Don Davis Auto Group (I used to work for them).

 

I'm positive that he'll keep his 4 BHPH lots going - be stupid not to.

turboshadow

Hmmmmm....what are upfront costs like?

 

Plenty of vacant Wallyworlds and supermarkets around here.

 

How hairy is the paperwork involved?

 

Hmmmmm...methionks I'll do a little internet research.

 

Turboshadow (of Turboshadow's BHPH!!!)

driftracer

you need, I'm thinking, about $50,000-100,000 if you want to start strong, much less if you don't mind whining and worrying.

 

You need a dealer's license for your state, whatever insurance is required to go along with that, a good eye for used cars that'll last at least 2 years after you buy them, and won't require major costs at breakdown, a place to do business, a software program for running contracts and DMV paperwork, a lawyer, and a good mechanic, if you're not one...

 

My buddy started out small with 4-6 cars...I think I would start out stronger with 15-20.

isellhondas

I wouldn't want any part of it. These are called "Pot" or "Note" lots and they operate just like driftracer said. They buy the cars the big dealers don't want and sell them to people with rotten credit.

 

By misfortune or by being deadbeats, these lots are the only places these people can buy cars.

 

Two days late on a payment and the car gets popped and the process starts over.

 

I heard of a guy with a BHPH lot that actually had a sign on the wall in his office.

 

" The best way for you to get back on your feet is to miss a payment".

 

A necessary but dirty business.

stickguy

Don't you run into a lot of registration costs? In NJ, they recently changed to a 4-year registration, so it costs about $350 to register a car now (at least a new one). Actually, I don't know if used cars are still 1 year, but that's still $80 or so, plus sales tax.

 

Drift, how does it work on these repos? At what point is it a new sale, vs. just getting the same car back (I guess that means it stays registered to the same buyer).

 

Again, I'm assuming that theses cars get registered to the buyer, otherwise I guess it would really be a rental!

kyfdx

At least, if you have to make a living at it right away...

 

If you can don't have to draw income for awhile, you could probably get by with less..

 

I have a co-worker who has a used lot... But, he has to pass up a lot of deals that make good financial sense, because he doesn't have enough capital.. He can only afford to get cars from the auction, where they give him 60 days credit.. He has to turn and burn them, or send them back through the auction... I've seen him pass up great deals, because he doesn't have the cash flow to pay for a guy's trade-in.

 

I bought a car from him for my mother-in-law... he had just purchased it at the auction the day before... She had a trade.. A perfect car for his lot (semi-rural blue collar area), but he couldn't afford to hold it.. He ran it through the auction the next day for a $200 profit, and I'm sure he could have made $1500-$2000 within a couple of weeks, if he had put it on the lot..

 

Most small businesses fail because of inadequate capitalization.... I think BHPH would be the same way..

lemko

...those with credit problems are often careless about other things such as insurance and maintenance. Suppose some credit criminal crashes or trashes your ride? How can you sue him? He works as an apprentice french fry technician at Wendy's and his net worth is $14 and a record player.

 

Driftracer, you play a BHPH dealer on TV? Is it for a Philly dealer and shown on a local station?

If so, what channel so I can keep an eye out for it.

 

I've been on vacation for the past few weeks. The TV commercials aired between Maury Povich and Jerry Springer are for places like the Cherry Hill Triplex along with those for trade schools, title loans, and accident lawyers.

rroyce10

....... Drift is painting with some broooad brush strokes here, maybe still a little effected by all of that New Years bubbly and cheer .. he makes it sound so easy ...l.o.l....

 

            BHPH lots that have been in the business for a looong time and have been successful usually have a little "Jingle" (I hope) in the Hip National Bank .. especially this time of the year, most are still looking for the payment from November .. also this market has changed drastically in the last 5/6 years .. the day of the "nice" $700/$900/$1,500 vehicle is kinda over, even if they purchase a semi-nice one for, lets say $1,200, a good store will have to drop another $300/$500+ just to make it seaworthy for the next 8/10 months .. that means to make a profit with a $1,500 downpayment, they need to be on the hook for $1,000+ just to break air ... that's why BHPH dealers are having the largest failure rate ever ..

 

               Drop 25 vehicles out there and your waiting for your profit, or at least your money back (or, just your original investment) for the next 4/6/8 months depending on the reliabilty of the vehicle - and thats if the vehicle doesn't cough up the air conditioner and the tranny doesn't go south in the next few months, then your back-pedaling just to keep the guy in the vehicle, or hook-it, then pay for the repairs anyway .. it can be a vicious circle, most dealers nowadays will settle for 30/50% of what they have in it, just to get it rolling ...

 

            It's easy to have $75,0/$150,000 just rolling around and not see a profit til' Easter, thats a long time to hold your breath because it's a big gamble .. and that doesn't count the property, lights, heat, mechanic time, paintwork, body fixes, parts, insurance, liability, city and county ordinances, advertising, taxes, titles, etc, etc, etc.com ......

 

                                 Terry.

isellhondas

People with bad credit usually don't mend their ways. They also don't like getting their cars popped. It can get nasty.

driftracer

it was easy, or cheap, or effortless. I'm just saying that it's something I'm considering in the next 10 years.

 

Broad strokes, as Terry put it, are appropriate here, simply because only a few here would understand all the intracacies and details, so a general overview was all I was trying to do.

 

Stickguy asked about repos - first and foremost, I would be as humanly FAR AWAY from this area (PA/NJ) when this was done, I could care less what kind of hassles there are for registering in NJ...In either state I would be doing this business, the plates belong to the owner, not the car - your car gets repoed or totalled, the plates are removed and handed to you, the lender or insurance comapny has the ability to "carry" the registration like a car dealer, until it is resold or disposed of.

driftracer

Insurance and maintenance? Maintenance isn't that important, since most BHPH dealers only lend a car for 12-18 months. Insurance, depending on the age of the vehicle and the driver (whether it's liability or full coverage) has to be in place.

 

If the credit criminal crashes your ride, it's HIS loss, not yours. You've already broken even in the car - worst case is that you don't make anymore profit on that unit, but the good news is that you have a guy, who works at Wendys as an associate french fry cook trainer, who needs another ride to work. Cha ching!

 

No, I don't play a BHPH dealer on TV - that was a joke, as is humor. Only been on TV twice, both times appearing as myself.

qbrozen

OK, so bad titles were mentioned earlier (salvage, TMU, etc). Does this show on the title that the dealer has? Does the dealer even have a title? Or is that sitting at a bank somewhere? How do you address this if looking at a suspect car? Do you just ask the dealer if its clean and take their word? Or do you not buy it until you get to see the title for yourself?

driftracer

and most wouldn't care anyway, especially if they can pose in a newer car than their budget would normally allow.

 

The idea here is that they have bad credit, and they're broke, but they want to portray an image of wealth, or least financial bouyancy.

qbrozen

yer killin' me here, drift.

 

Here's the recap, though, on my situation. I've been to a dealership that, by some of the details expressed here, MAY be a BHPH lot. They do their own financing. BUT, they have nice higher-end cars for decent prices. I may want to do business with these folks. I don't NEED to use a BHPH lot because my credit is stellar. But why pass up a good deal on a nice car UNLESS it turns out to have title problems. So how do I discover these problems BEFORE buying?

driftracer

do the normal background checks and mechanical checks on it, even if you finance with the dealer, you won't have any problems because you pay your bills.

 

Personally, though, even on an older car, there's no way that a credit union couldn't beat mom and pop car dealer's rate..

 

The title problems, though, are a real concern, since the majority of vehicles that are passed through the BHPH and We Finance lots aren't qualified for retail sale at a regular dealership, for many reasons, not just age and mileage.

lemko

...with used Mercedes, BMWs, Jaguars, etc. Ironically, these lots are in some of the seedier neighborhoods where it would seem unlikely anybody'd be in the market for such a vehicle. However, they do a brisk business anyway. I don't know if these places are also BHPH lots.

 

The last thing a guy who's worried about paying the rent on his sleazy one-bedroom apartment in a marginal neighborhood needs is a used German luxury car that's out of warranty. "Nice ride, homes! I like those Pep Boys Futura tires on your E-Class!"

 

My girlfriend once worked as a leasing consultant in a high-rise. One of the tenants was a man with a $50,000 vehicle, yet he was a month behind on his rent and his four kids were sleeping on the floor, (no matresses even).

kyfdx

Around here (Cincinnati), those lots are in those neighborhoods because the overhead/rental costs are cheaper... A guy selling five to ten cars a month just can't afford the rents near shopping malls in suburbs.. no matter how much his cars sell for..

 

The guy looking for a $30K car, that went for $70K new, generally won't mind checking one out in that kind of neighborhood, as long as freeway access is fairly easy.. especially, if he thinks he can save $3K-$5K..

 

At least that is my take on it...

driftracer

those "Look at me, I'm rollin' a Benz/Denali/BMW/Cadillac (insert other vehicle here)" types are prime customers for BHPH lots. Many who have established regular payments often drive one for a few weeks, then swap to another in order to front a different style.

 

And yes, there are lots of Pep Boys junk tires on MB, Cadillac, and BMW products.

 

The boys in the hood comprise a VERY large portion of BHPH sales.

Kirstie_H

Let's be careful not to get into stereotypes... I know where you're coming from, but let's be careful about giving nametags to groups. Thanks!

driftracer

Shall we say that folks who live in oppressed areas, ones who normally wouldn't have the cash flow to support that type a vehicle, are often that type of vehicle's prime owner in the BHPH scenario, because they can pose with something of a higher standard, and most folks don't know the difference.

 

Just like buying a fake Rolex when you work at Wendys - your buddies aren't smart enough to know the difference, and they think you're cool...plus you don't hang out with people who DO know the difference...

 

Just a month ago, I saw a young man working the counter at Mickey D's and he had a Rolex Presidential (with all the diamonds), plus HUGE rocks for diamond studs in his ears, like the pro football players wear...yeah, at $7 an hour, THOSE are real...

lemko

...the young man could've been an upcoming executive in the underground pharmaceutical industry.

 

I had a buddy who was a lot like the person drift described. He had more gold chains than Mr. T, more rings than Ringo Starr, and wore a floor-length leather coat over black silk shirts. He also had a very convincing fake Rolex and drove a black late-model BMW 5-Series. To those who didn't know any better, he looked outwardly successful in a flashy way. However, in reality, he was living in a rather run-down trailer park.

kyfdx

I dream about all the cars I could have if I lived in a run-down trailer park.... If only run-down trailers came with garages....

lemko

...for articles on the perils of buying at a BHPH lot:

 

http://www.courier-journal.com/cjextra/2004projects/byrider/

driftracer

JD Byrider is the corporate version of the mom and pop BHPH lot...

 

It's a shame that we need legislation to protect us from paying double the value of a vehicle - common sense, and a quick call to the lady at the bank with the NADA book could and should prevent that.

lemko

...in those stories, particularly the woman who paid over $16,000 for a Geo Metro with over 156K miles on it. I don't think Geo Metros cost that much new!

isellhondas

On an LS 400 we had in stock. He only had three questions.

 

1. Did it have chrome wheels?

 

2. Did it have the "gold kit"?

 

3. How much would the "notes" be?

 

He then went on to tell me that his credit was "better than it was". He asked me if a year old auto repossession would matter.

 

Some BHPH lot will no doubt sell him something I would suppose?

driftracer

BHPH lots usually don't bother with checking credit - what's the point? By the time you drive away, they have more info on you than the military would, plus the names of every relative within 500 miles...usually a copy of your phone bill (for the numbers, not just to prove you have a phone), utility bills, friends and coworker names, etc.

steine13

There's a world of difference between the clowns in the article and the lot that dkuhajda was describing a week or so ago.

 

That KY dealer sounds like a real crook.

 

It's not that I disagree that people *should* act like grownups and do some research. I just think that there's a limit somewhere, and that just because someone is stupid, it's not okay to take them to the cleaners like that.

 

It's a whole 'nuther story when a place tries to provide people with cheap transportation, and extracts handsome payments for the service. There does't seem to be much "transportation" involved with Byrider. Always accounting for the fact that there often isn't much "journalism" in journalism either.

 

To then turn around and sue the customer for the remaining payments on a car that doesn't run, that is rich. It's hard to believe you can get a judge to agree to order garnishment under the circumstances... I'd think there'd be some common-law clauses that could be invoked.

 

Either way, it's expensive to be poor...

 

-Mathias

2099

That franchise is notorious in this area (Northern Ohio). They advertise a free TV with every car and sometimes $500 worth of groceries too. I was in the business with my father years ago and still rent out our old used car lot. I went to the local auction with him( the guy I rent to) last year and the buyer for that local franchise was buying almost every high-mile POS in the cheap lane. I talked to him (the buyer) a little bit and he told me they don't even like cash buyers for the most part!! All that being said, 20 years ago my dad and I did a little BHPH with our less desirable trade-ins and it can be lucrative, but it is NOT easy work. My dad would wholesale nothing, we either sold it or junked it!! We did spend a lot of time chasing down and repoing cars and going to the steel mill on payday and following people to the bar to get $50 when they cashed their paycheck. We did not charge exorbitant interest though, and usually got enough down to crack the nut, but I still could show you about 30-50K worth of notes that we never collected and we were a small dealership. They(BHPH) serve a purpose, and we did okay at it without being predatory.

lemko

...in that article. Look how cheaply the cars are purchased at auction, the low blue book values, and the exhorbitant selling prices. Maybe the BHPH market would be better off simply going to a public auction. I remember one woman who bought a really nice 1989 Ford Country Squire wagon for only $800! The car is still going strong over 7 years later.

jlawrence01

The problem is the cash. If they could lay their hands on $1k in cash, they probably would not be at a BHPH lot.