One of the bigger obstacles people with bad credit face in the car-buying process is locating a dealer that can get them financed in the right way. Although many car lots cater to buyers with poor credit, most of them are “tote the note” dealers – also known as “buy here-pay here” dealers.
But there are issues with these types of dealerships. First, although these dealers can get you into a car, they typically don’t report your car loan or the payments to the credit bureaus. This means that while you may get the transportation you need, your FICO scores won’t improve – even if you’re doing a good job of making your payments on time. As a result, you’ll find yourself in the same credit situation the next time you need to purchase a vehicle.
Another reason that you should think twice about auto loans from buy here pay here car lots is that they are not affiliated with a new car franchise. What this means is that their lots are often filled with older, high-mileage cars that may be unreliable. This is not to say that all buy here-pay here dealers are bad. You just need to be careful and do your homework about any dealership you are considering.
