Financial Tips
Based on our extensive experience in the dealership industry and our history with vehicle financing, we would like to share a few essential tips before you secure your next auto loan.
The Quality:
When buying a used vehicle, you must prioritize quality alongside price if you want a vehicle that will last through - and well beyond - the life of your loan.
Many walk-in customers shop for a car the way they shop for a pack of cigarettes. They move from dealership to dealership with a pen and paper, writing down only the price, year, and mileage without ever listening to how the engine runs. Don't make this mistake. Take the time to look underneath the vehicle and know who you are dealing with. There are plenty of untrustworthy dealers out there selling vehicles that look shiny and flawless on the outside, but you would be shocked at what you'll find underneath.
The Annual Mileage:
When financing a vehicle, you must carefully monitor both its current mileage and your expected annual driving habits.
For example, you shouldn't finance a car that already has 150,000 miles on a 48-month loan if you plan to drive 50,000 miles a year. By the time the loan is paid off, the vehicle will have 350,000 miles on it. Long before that point, the car will likely break down or require major repairs that cost more than the vehicle is worth. I frequently see customers who are stuck making monthly payments on a car that doesn't even run. Many end up facing repossession, which severely damages their credit and makes it incredibly difficult to secure a decent interest rate on their next auto loan.
Never stretch your loan term just to lower your monthly payment without accounting for your yearly mileage. On the flip side, financing a low-mileage vehicle ensures you maintain a much better chance of retaining resale or trade-in value when you are ready to upgrade.
Down Payment vs. Loan Value:
Avoid the trap of choosing a vehicle finance deal just because it offers a very low down payment. Just like retail and trade-in values, every vehicle has a specific "loan value."
Banks and lenders determine this loan amount strictly by the vehicle's year, make, model, and mileage - without ever inspecting its actual condition. Because the lender doesn't check the vehicle, that responsibility falls entirely on you.
The difference between the dealer's selling price and the bank's loan value determines your required upfront down payment (plus taxes and fees). If a dealer is advertising an unusually low down payment, it usually means they bought the vehicle incredibly cheap due to its poor condition. "Don't make the wrong decision"
Additional Services:
Your Rights as a Buyer: By law, the choice to add optional services to your loan is entirely yours, regardless of what a dealership may tell you.
Please take your time to thoroughly review the Retail Installment Contract before signing. Keep in mind that no additional services are mandatory, and you must explicitly sign a separate Disclosure and Agreement for each one you choose to accept.
Optional Services to Consider:
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VSC (Vehicle Service Contract / Warranty): Optional coverage. It is often wise to shop around, as you may find better or more affordable coverage outside the dealership.
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GAP Insurance (Guaranteed Asset Protection): Optional, but highly recommended to protect you if the vehicle is totaled.
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GPS / SID (Starter Interruption Device): Optional tracking and ignition-disabling systems. Generally not recommended for most buyers.
GAP insurance:
Guaranteed Asset Protection (GAP) Insurance
GAP insurance covers the "gap" between your car's actual cash value and the remaining balance on your auto loan. If your vehicle is stolen or totaled while you are still making payments, this coverage ensures you aren't stuck paying for a car you can no longer drive. Choosing GAP insurance can also allow for a lower down payment, as it protects both your asset and the lender's investment.
Protect Your Investment:
To eliminate unexpected risks and financial loss, investing in a Vehicle Service Contract (VSC) is a smart choice. Our flexible 'pay-as-you-go' monthly plan is just $39.95 per month - less than the cost of a daily cup of coffee. You can opt for a short-term commitment of three or six months and cancel once you are confident your vehicle is running smoothly. Of course, you are welcome to keep the coverage active for long-term peace of mind.
The Reliability Rating:
Most cars on the market have well-documented mechanical issues. I strongly advise any customer - especially those on a tight budget - to do their homework before financing a vehicle. Always check reliability ratings and read owner reviews before committing.
Pay close attention to the repair costs for these known issues. While most vehicles have common points of failure, it’s crucial to distinguish between a major breakdown and a minor fix, as well as common versus occasional problems.
For example:
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Car A is known for knock sensor failures. The part costs $26 and labor is $65. That is a manageable repair.
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Car B is known for transmission failure. The part costs $1,000 and labor is $450. That is a vehicle you should probably avoid.
Example for good (reliable) vehicle:
Example for bad (unreliable) vehicle:
How Buy Here Pay Here works:
The image below explains how BHPH works. Also, they don't report to any of the credit bureaus. If you need to rebuild your credit or establish credit, BHPH is not the right choice.
The Maintenance:
The true cost of owning a car goes far beyond the monthly payment. You also need to budget for gas, repairs, and replacement parts. Before financing a vehicle, ensure you can comfortably manage these ongoing expenses alongside your loan payment to keep the car running reliably.
The Budget:
If you are on a tight budget, look for the vehicle that offers the lowest cost per mile of usage. For example, if you are choosing between two vehicles with identical monthly payments - say, a 2008 model with 145,000 miles versus a 2002 version of the same make and model with only 65,000 miles - choose the 2002. The lower mileage means it will likely last longer, giving you an extra 80,000 miles of potential use.
The Need:
Before you finance a vehicle, think, "Do I want it? OR do I need it?" Finance the vehicle that meets your needs and your affordability. For example, don't finance a truck with a high monthly payment and use it as a car because you like to drive a truck.
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