Tax-time car shopping tips before you “buy here, pay here”

As your tax return makes its way into your wallet, you may be thinking of using that extra cash to purchase a vehicle. And, when shopping for your next car, you may find yourself at a “Buy Here, Pay Here” auto dealership. These auto dealerships are known as “Buy Here, Pay Here” lots because not only do you purchase the vehicle from the dealer, but it also acts as the financial institution lending you the money to buy the vehicle. While this may seem convenient, you should be aware of the possible downsides to this type of financing:

Higher rates

According to the Consumer Financial Protection Bureau, the interest rates offered through these dealerships are often higher than at credit unions.

More Risk

While credit unions will set limits on the amount they will lend based on the value of the vehicle, these dealerships may not. So, you run the risk that the amount you borrow may actually be more than the vehicle is worth.

May not improve credit scores

Making auto loan payments on time has the potential to improve your credit score. However, since these dealerships are not traditional financial institutions, they may not be reporting your information to the major credit bureaus that compile your credit reports as credit unions will. If you are looking to improve your credit score, Champions First Credit Union offers loan programs that can help, such as our OnPace Auto Loan program and the Credit Rebuilder program.

A better alternative – contact your credit union first!

The Champions First Credit Union team is ready to help you make good financial decisions when buying your next vehicle. And, even if you have less-than-stellar credit, you can make a smart car-buying choice by following these steps:

For more information, visit our Auto Loan webpage, stop by your local Champions First Credit Union branch, email us at [email protected], or call 850-224-4960. You can also begin the loan approval process online.

Sources:
https://www.consumerfinance.gov/ask-cfpb/what-is-a-no-credit-check-or-buy-here-pay-here-auto-loan-en-887/

*The content provided in this article consists of the opinions and ideas of Champions First Credit Union, does not constitute legal or financial advice, and should be used for informational purposes only. Any decisions you make based on the information contained in this article is made in your sole discretion and liability. Champions First Credit Union disclaims any damages or liability for decisions you make based on the information provided.

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