Self-financing car lots are a mystery to many drivers

Self-financing car lots are a mystery to many drivers. Those afoot without cars peruse them wistfully. Other drivers without good credit and in need of another car are curious about them. However, there are myths hovering over these lots like a cloud. Do you know the truth behind these five buy here pay here myths?

Myth: I’m the Only Person with No Credit

Many young persons just beginning their adult lives need to accumulate credit. Many buy here pay here car lots report their clients’ accounts to the three major credit agencies. This is often the way young adults gain credit. Many people operate on a cash basis. Suddenly they find themselves in need of credit. These people often resort to self-financing car dealerships to get credit. You know that your job is your credit 

Myth: There is No Regulation for These Lots

Au contraire. State and federal regulations do exist for self-financing used car dealerships. While it’s true they aren’t heavily regulated, twelve laws and rules must be followed by such dealerships. Shoppers may choose cars knowing the lots are reputable.

Myth: Don’t Expect a Warranty

With big-name dealerships offering warranties on their used cars, buy here pay here lots in Houston find it reasonable to offer a limited warranty. Clients whose cars break down often fail to make their payments, so everyone loses. Warranties help both client and dealer.

Myth: A Huge Down Payment Will Be Required

In the bad old days, self-financing used car lots ensured their profit margin by charging nearly the car’s worth as the down payment. The interest and remaining payments covered the client defaulting on the loan. Today, budgets aren’t unlimited. Clients needing cars generally don't default on the loan. Furthermore, dealers are willing to work with clients based on their credit and income. That beats inventory not moving any day.

Myth: Interest Rates are Crippling

This is untrue for several reasons. Firstly, the dealership is loaning its own money on the cars. The clients will generally have little to no to bad credit. Since the dealer is taking the risk, charging from 12 to 17 percent interest is normal. Secondly, each state regulates how much interest a self-financing used car lot in Houston can charge. It’s called the State Usury Limit. However, this is the worst marketing method ever. Clients paying the highest interest rate will fail to refer others to the dealership. They will fail to return themselves. Yes, it makes the dealership money, but will do little to no good for the future. Thirdly, the fact that some dealerships use this tactic means that the disreputable cloud we spoke of above still hovers over all such dealerships, whether deserved or not.


Many self-financing dealerships don’t do credit checks. Clients with jobs of a year’s standing usually drive away in a used car, having negotiated reasonable, sometimes weekly payments.