Can Buy Here Pay Here Dealers Charge Any Interest Rate They Want?
Technically, many experts will lead you to believe that buy here pay here car dealers can charge any interest rate they want on your bad credit auto financing. After all, this is a market of private players that is beyond the scope of Federal regulations and each dealer is entitled to charge a rate they feel appropriate. If you look at just one side of any story, it is bound to feel ominous. But once you capture the overall picture, the cloud begins to disappear. Speaking for ourselves, we can tell you that Family Auto does not charge a random interest rate. The figure is majorly decided by the market, combined with the information we derive from your credit report.
The true story
Technically, again, even banks can charge whatever rates they feel like on your home or car loans. The Feds do not set an upper limit above which banks cannot go. Since the market does not have just one bank and competition is allowed to exist among multiple players, banks thus compete against each other and try to offer lower rates than one another so that customers are enticed to take loans from a particular bank over another.
The same concept applies to buy here pay here dealers. When experts say that such dealers are beyond the regulations of Feds, they only mean that the central authority cannot control the amount as auto loans we can hand out, which is regulated at banks. On grounds of interest rates, the market is similarly competitive and multiple dealers compete to offer lower rates to attract customers. So, even when it might feel that BHPH dealerships can charge any random rate, America’s capitalist market puts a lid on the same to benefit consumers.
Your financial reports matter
You may search online for buy here pay here car lots near me with the lowest interest rates but you will often see reputed dealerships displaying a starting figure. Because, along with the market’s feature, your credit report plays a crucial part in determining the interest rate payable.
Interest payments are a lender’s compensation for lending you money. The more unlikely a borrower is to keep his/her part of the deal, the higher the compensation the lender will have to charge. Thus, interest rates rise with a fall in creditworthiness and banks do not entertain bad credit score holders. Buy here pay here dealers, however, extend bad credit financing in exchange for a higher interest rate.
If your credit report shows that you already have multiple loans and your pay check just covers the auto loan monthly payments, a buy here pay here dealer has to charge a higher interest rate. If you, however, pay a high down payment and reduce the loan amount, the interest rate payable will fall proportionately.
You pay what you are supposed to
And that is the deal you get with the best buy here pay here car dealers. So, cut the noise that taints the buy here pay here market. Take bad credit loans without worries to buy your next used car. In an accredited dealership like Family Auto, the interest rate is calculated based on a logical system and not accordingly to our whim and fancy.
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