Car dealerships that allow you to make payments either weekly or bi-weekly, depending on when you get paid, do exist. They're most commonly referred to as buy here pay here (BHPH) car dealers, or you work you drive lots, and they can be a real advantage if you need a vehicle fast. But, proceed with caution. Sometimes, what seems like a great deal at first can cost you more than you bargained for in the long run.
The Advantage of Pay Weekly Car Dealerships
Often, dealers that allow you to pay your loan according to your pay schedule don't check your credit like traditional or special finance dealerships do. The reason these dealers don't need to rely on third-party lenders is because they are the lenders. This type of auto loan is called in-house financing, where your loan and your car come from the same place.
Because these in-house financiers don't rely on your credit, your income is your ticket to approval. As long as you make enough for the dealership to know that you can comfortably make a payment every week or two, depending on the schedule you agree to, you're usually set. To determine this, a dealer makes sure you have enough disposable income by calculating your debt to income (DTI) and payment to income (PTI) ratios.
Another advantage to these dealerships is that you can often sign and drive in one day, as long as you meet the requirements and provide the needed down payment. Down payment amounts vary by dealer and the price of the car you're buying, but you typically need to cover at least your first payment and the taxes for the vehicle.
Disadvantages of Using a Pay Weekly Car Dealership
Of course, there are disadvantages to using you work you drive dealerships. One of these is the fact that not all of them report loans or on-time payments to the credit bureaus. Because they don't need to pull your credit, they often don't feel the need to report it, either. Bear in mind that's not always the case, as more and more BHPH dealers are realizing the importance of reporting your payments.
The vehicles at these car lots are also not the latest models. Most are older used vehicles, which means you need to proceed with caution. Your best course of action with any car you're seriously considering is to look at its vehicle history report and to get a pre-purchase inspection done with a certified mechanic.
The interest rates on buy here pay here loans are also typically higher than average. Even though it may seem like you're getting a good deal by being able to pay on a weekly basis, you accrue a lot of interest charges over the course of your loan this way. Interest charges accrue daily based on your loan balance, and weekly payments only decrease your balance a little at a time. Also, your payments typically need to be made in person. If you don't live or work near the car lot you purchased from, it may not be convenient to have to make that trip every week or two.
Is There an Alternative to Pay Weekly Dealerships?
Before you start searching for local pay weekly car dealerships in your area, consider the other options available if you have bad credit and need a vehicle. A special finance dealer may be the right choice for you. These dealerships are going to check your credit, but their lenders rely on other factors – like income, employment, and residency – to get you approved for auto financing, and they specialize in helping people in many credit situations.
Special finance dealers don't always advertise this, though, and can be difficult to find on your own. Plus, driving from dealership to dealership looking for a lender that can help can be a hassle. Here at The Car Connection, we can help take the hassle out of the search by matching you to a local special finance dealer that has lenders available to help. To get the process started, simply fill out our easy car loan request form, and we'll get to work for you right away!