History of ‘Buy Here, Pay Here’ Dealerships

If you’ve ever shopped for a car while struggling with credit, you’ve probably considered a ‘Buy Here, Pay Here’ dealership. We understand what these businesses do (they essentially hand out the credit themselves to potential buyers), but do you know how these dealerships popped up in the first place?

If you’re looking for a brief history lesson, continue reading to see how these ‘Buy Here, Pay Here’ car lots came to be…

The Buy Here, Pay Here industry first started in the 1970s, as many consumers were struggling financially during the USA Savings and Loan Crisis. It was tough to acquire credit and it was tough to get a job, and as the medium income stayed steady, the prices of cars skyrocketed. Ultimately, it seemed like there was no way that someone who was down on their luck financially could purchase a vehicle.

Noticing that many of their customers were unable to pay cash for their purchased vehicle (or secure a loan from the bank), many dealerships started creating their own related finance company (generally regarded as RFCs). That affiliated company would approve the loan, allowing a customer an opportunity to buy a car. There wasn’t much risk for the dealerships, and many could benefit financially from the loan (which often exceeded the profit made on the individual vehicle) and the sale of their car. Of course, even more money would be brought in if these already-sold vehicles were repossessed, as the dealership could turn around and resell the vehicle to another consumer.

It wasn’t all easy for these dealerships. The owners were forced to purchase their inventory with a floor line of credit, meaning the vehicles purchased by the dealer had to be paid for within 90 days. Paying off a loan on an unsold vehicle isn’t a positive for these businesses, justifying while you’ll see these dealerships trying to push their vehicles as quickly as possible.

Furthermore, the affiliated RFCs weren’t watched by the Federal Reserve, but rather the Department of Financial Institutions or Department of Commerce. This presented some additional issues for the dealerships, as these departments would often require a higher interest rate, higher late fees, and grace periods.

Interesting, right? It’s no surprise that the government has regulated the process to an extent, and it should be refreshing to know that consumers do have some kind of protection. One place you’ll never have to worry about being scammed is at McCluskey dealership, where the helpful staff will find you a suitable car that fits into your financial plans.