Bad credit is a fact of life for some Canadians. Whether it’s because of high credit card bills, issues like bankruptcy or foreclosure, or even previous car repossessions, many Canadians are living with bad credit scores. Around 23% of Canadians have an average or sub-par credit score.
Unfortunately, bad credit and debt are vicious cycles. Many businesses, such as payday lenders and title lenders, exist only to prey on Canadians who have bad credit.
This is especially true of “Buy Here, Pay Here” (BHPH) Dealerships. These dealerships usually offer low-quality used cars at exorbitantly high interest rates – and cater specifically to Canadians who have bad credit, or no credit at all.
To help you understand these dealerships – and why you should avoid them – we’ve put together this article that examines the ways they prey on Canadians who have bad credit. Read on, and see why you should choose a consumer-friendly company like Ride Time – instead of a BHPH dealer!
1. BHPH Dealers Don’t Care If You Can Make Your Monthly Payments Or Not
BHPH dealers will sell a car to anyone. They don’t care about your credit score or your financial history – and they may not even ask for items like proof of income, employment, or other detailed financial information.
Why? Because they don’t care if you can make your monthly payments or not. The monthly payments for a vehicle financed at a BHPH dealership are usually sky-high, with APRs exceeding 20-30%! In addition, many loans are packed with “junk fees” which we’ll discuss later.
This is because the BHPH dealer profits directly from high monthly loans. These high APRs allow them to make a quick profit even if you only make payments for several months. Then, if you fail to make a single payment, they’ll repossess your vehicle immediately – and resell it to someone else!
This cycle is repeated at just about every BHPH dealer. A staggering 33% of BHPH cars are repossessed, compared to a repo rate of about 2% among all other auto dealerships.
2. BHPH Dealers Sell Low-Quality Cars That Break Down – And Cause More Financial Strain
As you might expect, most cars sold at BHPH dealerships are not of very good quality. They’re often repossessed multiple times, and have had multiple owners who did not take good care of them.
This means that, even if you buy a used car from a BHPH dealer and you pay your monthly auto loan on time, you could get stuck with a low-quality junk car. And if the car breaks down and you have to pay for repairs, you could end up failing to make your monthly payment – resulting in repossession.
Again, this cycle is just another way that BHPH dealers profit from low-quality cars. They get to pocket the money that you paid for your car, and then if the car can be fixed, they’ll perform minimal repairs and sell it to somebody else.
3. BHPH Dealers Pack Their Loans With “Junk Fees” – Because They Know You Can’t Say “No!”
At a standard car dealership – whether new or used – third-party lenders are used to issue auto loans. This means that car dealers do not profit directly from higher loan prices. In fact, they may try to get a lower lending rate, because that would make a customer more likely to purchase a car.
But because BHPH dealers are both the loan issuer and the car seller, they inflate the price of their auto loans through unnecessary “junk fees” like GAP insurance, theft deterrent packages, “window etching”, credit insurance, and other fees.
These additional loan kickbacks go directly into the pockets of the dealers – and result in an inflated, overpriced auto loan that’s extremely difficult to repay.
4. Mandatory Arbitration Clauses Protect BHPH Dealers From Liability
Here’s one of the most sinister ways in which a BHPH dealer is protected from liability. Most BHPH dealers will require customers to sign “mandatory arbitration clauses” before they will issue a loan.
Mandatory arbitration clauses essentially mean that customers at BHPH dealers waive their right to sue and appeal in court. Even if you have a valid complaint against the car dealer, you will not be allowed to pursue this complaint in a court of law. Instead, you will have to use a third-party arbitrator – and this process usually favors auto dealers over individual consumers.
Don’t Choose BHPH Dealers – Come To Ride Time Today!
No matter how bad your credit score is, you don’t deserve to be exploited by a Buy Here, Pay Here dealer. At Ride Time, we believe in second chances. If you have bad credit in Canada, we’re still willing to work with you to put you in a high-quality used car at a reasonable rate.
We have a network of 15+ specialized lenders who issue loans to Canadians with bad credit. If you can give us proof of employment, a take-home income of $1,500/month before deductions, and a valid Canadian driver’s licence, we’ll do our absolute best to get you a great deal on a fantastic vehicle.
So shop now at Ride Time, and don’t let yourself be exploited by predatory auto dealers.