How big of a rip off are "Buy here, pay here" car lots?


The difference is that BHPH lots don’t want to sell to people who can pay for the cars. If they had their druthers they’d only sell to people who couldn’t even make the first payment so that they could get the car back on the lot faster, ready to take another large deposit.

When I was younger and more naiive I found a neat car at a BHPH lot. I didn’t know anything about these places - all I knew was that there was a cool Miata that I could afford to pay cash for. I went in and tried to pay cash for it, and they tried everything to get me to look at more expensive cars that I couldn’t afford. At the end of the process they told me another salesman had just sold it so I couldn’t buy it. Drove by 3 weeks later and it was still there. They’d lied so they could sell it to someone who couldn’t pay for the whole thing right away.


How much they pay.


My observation on the situation is that regulations have evolved to serve the best interest of businesses that prey on those who are mentally challenged financially with no concern for the detrimental effect on the vast number of people who are seemingly clueless of the inevitable outcome of easy money offers. Mississippi currently has a 592% APR limit on pay day loans and title loans and tote the note car lots can write in all manner of penalties to enable repossessing cars the day after a payment is due. And if a buyer has just 1 payment left to complete the contract and is a day late the car can be picked up resulting in all manner of fees and penalties.

Being poor can be a miserable experience with no discernible escape.

correction; the legal limit to APR in Mississippi is currently 520%


I had colleagues that taught at the university where I was employed that lived paycheck to paycheck. These colleagues were so desperate that they would beg to teach overload classes. The rate of pay for teaching an overload class was much less than teaching classes assigned on our regular load. I turned down these extra classes. I reasoned that if I worked in a factory, I would get time and a half for overtime work. Some of these overload classes were 80 miles away.
My institution demanded that we publish and bring in grant monies for promotion. I saw colleagues teach all these overload classes and not be promoted for years. Yet, they were driving newer cars and had higher mortgage payments than I had. Once you get on that treadmill of making payments to support your desires, its hard to get off.
I have sympathy for those who have to purchase cars from a “Buy Here Pay Here” lot. They may never get off that treadmill. I was fortunate when I was starting out that cars were more easily repaired. With my Husky 3/8" drive socket set that I “bought” with S & H green stamps, a set of feeler gauges, a couple of combination box end and open end wrenches along with a hammer and s couple screw drivers, I could tune up my car, change out the water and fuel pump and other small repairs for less than $20 worth of tools. I couldn’t do that if I was just starting out today. I might be buying my cars at a “Buy Here Pay Here” lot.


I have to respectfully disagree that BHPH lots are ripoffs. The business model is distasteful but until those dealers are forcing people to sign the contract at gunpoint they are not ripoffs.

The buyers are making a conscious decision to buy an overpriced car at a high interest rate so make the payments regularly and there won’t be a problem. The dealer is having to deal with people with a fair number of them being highly prone to defaulting so the distasteful business model is needed.
It’s that or walk…

New car dealers often do the same thing; especially those located near a military base and who prey on generally young service personnel with little financial experience and who have a decent paycheck for the first time in their life. Again though, they made a conscious decision.


I knew a guy who got himself into that cycle

he kept digging himself a deeper hole

Several years later, after not being able to crawl out of the hole, he finally declared bankruptcy

All those years, while I was driving a paid off and worthless car and living within my means, this guy kept making bad decisions. He kept making fun of my old car(s) . . . and I kept telling him, “Yeah, my car’s old and won’t impress anybody, but it’s paid for”

I remember Stars and Stripes . . . I know many of you guys remember this newspaper . . . would regularly report about this phenomenon. I would see these young GIs eyeing these brand new vehicles that they couldn’t really afford.

And then there was the other side of the coin . . . some european used car dealers, who would sell used-up old cars, which would NEVER have passed local civilian safety inspections, but were able to barely pass the usareur inspections, which were far less strict. I know things have supposedly changed dramatically, but I’m talking about the situation in the 80s and 90s, not today.


When financial regulations allow predatory marketing and predatory credit to take advantage of the unwary with no limits and then virtually eliminate bankruptcy as an escape we are promoting hard core poverty.

I think a great many people understand being broke and don’t understand being chronically poor.


I don’t think you were wrong in anything you said. I think we just interpret the actions differently. Legal and moral are generally two different things.

What they’re doing is perfectly legal, but knowingly preying on people that you know will get into trouble and be unable to pay so that you can make windfall profits on crap cars is morally bankrupt.

Putting this in another industry, if a customer came in and asked you to change the engine because it threw a rod, and when you got it on the lift you saw that the frame was rusted out and dangerous and the car needed to be junked, would you tell the customer about the frame before or after you did the engine swap and charged them for it?

If your answer is before, then you understand why it’s not OK to take advantage of customer ignorance/inability in order to make more money than you otherwise would.


I agree that morally a BHPH lot is a bit of a stinker. Assume for the sake of discussion that there was not a single BHPH lot on the planet. Then what? Where are those people going to get a car?

As for the engine swap scenario that’s a no brainer for me. I’d tell them up front the car ain’t worth it.

Cwatkin asked about interest rates at these places. A cut and paste regarding the military aspect of it. Ouch…

In an effort to curtail predatory lending, Congress passed the Military Lending Act in 2006, a regulation that placed a 36% interest rate cap (known as Military APR) on payday, car title, and refund anticipation loans to active duty, reserve duty, or active guard service members.


Wow! THAT is an eye-watering interest rate!

Heard a news story that US Bank is offering “payday loans” now with a 71% interest rate. If the local high schools aren’t teaching a mandatory finance course that explains what interest is and means, they aren’t doing their job!


I decided to verify my earlier statement about the interest rate in Mississippi and I misstated(?) it

Currently the state limits the APR to 520%, reduced by the legislature to protect the public, dontchaknow.


Would anyone here agree that McDonalds is a delicious, nutritious, healthy, economical way to feed yourself? No, I think not. Yet they have found a clientele and continue to operate. Somehow, some way they are filling a market need. So do the BHPH car lots.

I’m not condoning or recommending their practices or products. But you can’t blame them for poverty and debt any more than you can blame Burger King for diabetes and heart attacks.


I think about the situation in my community. Over the last two decades, over 15,000 factory jobs are gone and the factory buildings torn down. I think about a person with a family who owes on a mortgage. He can’t sell his house because there are no buyers. He doesn’t have a job so he really can’t get credit. Now let’s suppose the person is offered a job, but needs a car to get two work. A Buy Here Pay Here may be the only option
Another scenario is a situation where the person with dependents is holding down a low paying service job. The pay is so low that the person qualifies for food stamps. The person needs transportation to get to this job. Again, the BHPH lot may be the only hope and even those lots have dwindled in numbers.
On the morning the free food pantry opens, there is a long line of people getting what they can. The school population is 50% of what it was 15 years ago. In some of the schools more than half the students are on a free lunch program.
Payday loan companies do s thriving business. One positive note is that public transportation has thrived.


Fifty years ago only crooks charged outrageous interest and now today doing so is legal and licensed here. The US is really moving up in the world in so many ways.


In having to deal with the general public, I personally would much rather deal with people with good credit. I am not saying this because I take payments on anything but because of the manipulative stuff they try to pull and all. Unfortunately there is a reason many of these people are in the situation they are in. People don’t want to work with them, offer them a job, and such.

Rent to own centers are the perfect example of cheap stuff being sold overpriced. Typically it will be about worn out by the time it is paid off as mentioned in the salesman example above. I see that with the electronics and the furniture and appliances all look like cheap junk as well. Some of the junk used cars you see on these lots are probably much the same. The JD Byrider one I mention actually has pretty decent looking cars on the lot but I am sure they are horrible on the interest.

Again, I have to deal with these manipulative people from time to time. I focus my business in a way that I filter out most of this nonsense but some still gets through. When they do they just remind me that I don’t want to have anything to do with them. The only way to make them worth dealing with would be to charge too much so I just don’t deal with them. For example, I have found the gamers I deal with are typically the type that who live like pigs, have no job, are on drugs, and completely unreasonable. I have gotten to where I charge more than you can buy a gaming console for just to get it in the door. Most tell me they can get one off eBay for half my price. I tell them that is true and what I would do. I don’t even want to deal with these types of people anymore. Opening up a unit only to have it reek of cat piss and have dozens of live roaches come scrambling out isn’t exactly my idea of fun.

No one forces people to walk through the doors of a BHPH car lot with a gun to their head. No one forces them to buy lottery tickets by the gross either. There is a reason these people are in the position they are in. It always makes me mad to walk into a convenience store on the day government benefits come out only to have to wait in line for all the people buying dozens or hundreds of lottery tickets. These people who should be the last to spend money on something like this are spending a huge portion of their income on such items.


Each state used to have their own cap on interest rates, the the Supreme Court decided that the laws of the state where the lending institution was incorporated governed the rate, not the state where the loan was made.

As far as BHPH car lots collecting big down payments and repossessing the cars at first opportunity, that is ridiculous.

These customers don’t have $2000 to put down on a car.,if they did they could buy a $2000 car that would be just as good as some of the cars on these lots.A lot of these lots are happy to collect the late fee as long as the customer pass within the month.There is one BHPH lot in Buffalo that specializes in ok cars with over 100,000 miles and gives their customers a 30 day warranty like that required ny NY State even though cars over 100,000 mile are not required to have a warranty


I guess I was too slow in catching on to such people @cwatkin. Quite a few got past my radar. What’s your secret?


I have a neighbor that works for a company that builds custom yacht’s for millionaires. The company asks for a very high deposit, and then subsequent payments as the build progresses (could take up to 5 years build). And a very large portion of the buyers skip the last payment (due on delivery). They have to charge about 20% more then what they need to because of all the good credit millionaires who skip out at the end.


Of course they do. My sister in law is one of them. Constantly broke due to her own bad financial decisions. She had a few grand after she got her tax return and ran off to buy a $17,000 car with it. Personally, if I was broke, when I got a few grand I’d get the cheapest halfway decent car I could find that wasn’t any more than when I had. I’m not adding to my monthly outflow when the income is too low to support it.

She’ll doubtless be using this year’s tax return to back-pay the non-car bills she’s neglected so she doesn’t get her car repossessed.

To be blunt, she’s a financial idiot, and when she buys a $17,000 car by borrowing at least $14,000 at God only knows what interest rate, she reduces her ability to pay her other bills, then goes to the state and gets assistance that comes out of your tax dollars.

And she’s one of the better (read: less desirable) customers of BHPH lots because she’s choosing to neglect her other responsibilities in order to keep the car note current so it doesn’t get repoed.

Lest you think that’s just a personal anecdote and I’m still wrong:


My little home town just began a limited bus service and a great many adamantly oppose the service on the basis that those who are unable to buy a car should not expect those who work hard and after paying all their taxes and can afford a car should pay higher taxes to provide subsidized transportation for the deadbeats who can’t. But I’ve never heard those critics voice any objection to the vast array of licensed predators who swindle the poor at every opportunity. And the predators are so obvious.