The Business Model of Bad Credit Auto Dealers Explained

The 2008 financial crisis has painted a grim picture around subprime loansbut the US has recovered and such debt now forms a booming market in another industry. Bad credit auto dealers have flourished even when the housing sector went for a toss. The reducedprincipalloan amount has enabled a lot of buy here pay here dealers to hand out financing to poor credit score holders without carrying much risk. People in America need cars. Used car dealers wanted to sell cars. When banks could not entertain subprime loans, BHPH built a business model to make the ends meet.

The no credit/bad credit dealership business model

As evident, these are dealerships who are car sellers and house a financing department. They extend auto loans to customers with subprime, bad, poor, or no credit score. Anything below the 690-mark is seen as a risk by the conventional lending institutions and they often turn down loan applications on the possibility of default. The BHPH dealerships do not maintain such restrictions. They approve your financing request on the condition that you buy the car from their dealership only.

Thus, a typical buy here pay here no credit check dealership in Greenville, SC will earn its revenue via two sources. One, the profit margin on the car that they are selling. And two, the interest rate they charge you on your financing. These businesses have propelled the US used car market to impressive heights where over 60% of all vehicles currently sold are used. The stringent debt measures after the 2008 crisis have made taking loans difficult even when the interest rates have been cheap. The BHPH dealers helped customers to remove the bottlenecks.

The legitimacy of the model

The economic horrors of the housing crisis naturally place subprime auto loans into a questionable footing. But the underlying structure is entirely different. Most bad credit auto loans in Greenville, SC, comes with a comparatively higher interest rate which helps to offset the risk a bit. Plus, cars are easier to procure and resale in case of a default than houses which tones down the credit’s accompanying risk.Additionally, the average price of a used car including interest rates is $20,000. Such figures are affordable to most bad credit holders and consumers rarely default. The entire model is a win-win for both dealerships and auto buyers.

Skepticism often arises from a lack of proper understanding. Basic knowledge is enough to normalize the unknown and establish the legitimacy of any entity. Bad credit auto dealers are legit businesses in the US. And they are providing cars to hardworking professionals who are yet to financially establish themselves.So, remove your apprehensions with this knowledge about the BHPH business model and get that long-pending used car to boost your productivity.