"Buy Here, Pay Here" Abuses
Costly Cash, Loans for Clunkers
"Buy Here, Pay Here" dealers typically mark up
the retail value of their vehicles by at least 83%
A "Buy Here, Pay Here" dealer is typically a used-car dealer that specializes in the sale and financing of older, high-mileage vehicles for borrowers of low and no credit standing. Unlike traditional car dealers, "Buy Here, Pay Here" dealers directly finance the vehicles they sell, typically at higher interest rates averaging 24%. According to CNW Marketing Research, "Buy Here, Pay Here" dealers sold nearly 2.4 million cars nationwide in 2010.
In addition to the high cost and interest rates associated with "Buy Here, Pay Here" dealers, these type of dealers often rely on the "churning" or repeated re-reselling of their marked-up vehicles to generate much of their revenue. Repossession rates hover in the 30% range, with collections and repossessions being a critical part of their business model.
How Abusive "Buy Here, Pay Here" Deals Work
Three-Part Series by the Los Angeles Times:
- Part One: A Vicious Cycle in the Used-Car Business
- Part Two: Investors Place Big Bets on Buy Here Pay Here Used-Car
- Part Three: A Hard Road for the Poor in Need of Cars