Is In-House Auto Financing Right For You?

If you're in the market for a new vehicle, you've probably already set a limit on how much money you plan to spend. When it comes to getting financed for a car, there are a lot of options available and not all of them are right for every buyer. In-house financing, also known as "buy here pay here" is an option offered by car dealerships to give buyers a simple way to get a car loan right there on the spot. Here's what you need to know about in-house financing before you apply.

Why Is It Offered?

Most car dealerships offer the choice of in-house financing in order to help them make a quick sale. The buyer can simply apply using the dealership's internal loan system and get approved for the purchase immediately. A bank loan may take more time to be approved and it also requires more paperwork for the dealership and buyer to complete before the purchase can be finalized. By offering to finance through the dealership directly, the sale can be closed much more quickly and car buyers can be on their way with keys in hand.

What Should I Look Out For?

Dealerships who provide in-house financing will typically approve customers with a lower credit score. Because they're willing to take on high-risk buyers, the interest rates are usually a lot higher than a traditional car loan for people with bad credit. If you are unable to make your payments, the dealership will simply repossess the car and resell it to someone else. By taking on more risk, the dealership is passing the high rates on to you, so you can expect to potentially pay more in fees and interest each month than you might with a traditional loan. People with good credit, however, may be able to score a much lower rate. 

What Are The Benefits Of In-House Financing?

Many dealerships provide customers with special incentives such as a zero percent interest rate for customers with stellar credit. If you fit the bill, consider taking them up on the offer. Most banks are unable to offer customers rates that low so people who have good credit can certainly benefit from special deals only a dealership can provide. Alternatively, if your credit is not so great, in-house financing can give you the option to buy a car that might not be available otherwise. Since car dealerships process high volumes of loans, they're able to offer almost anyone a loan, even if they have credit that isn't too great. If you're considering an in-house financing loan for your next vehicle, be sure you choose an honest dealership that will offer you an affordable payment plan with agreeable terms.