The “Buy Here, Pay Here” Car Buying Scam

With credit scores and history of ever-growing importance, it is not unexpected that there are sectors created to capitalize on the lack of credit or even the bad credit of consumers. One fringe industry that has gained notoriety for exploiting the lack of credit or bad credit of consumers is the “buy here, pay here” car dealerships. These dealerships, touted as a solution to all credit issues, are notorious for unscrupulous dealings.

How The Scam Works

As the name suggests, the dealership in “buy here, pay here” transactions serve the dual purpose of being the seller as well as the finance company that holds the note on the vehicle being purchased. Due to this, the dealership has a right to repossess the car if there is a breach in the financing terms. The dealership will then request payment of the outstanding balance of the entire car loan from the consumer. If the original consumer fails to pay the outstanding balance of the loans, the vehicle is returned to the dealership’s inventory and is sold again to the next unsuspecting consumer. Additionally, the dealership, in its role as the finance company for the repossessed vehicle, can seek to collect the deficiency (the difference between the balance owed by the original consumers and the purchase price paid by the subsequent consumer). This is a cycle that repeats itself with remarkable frequency and it is not unheard of for the car to be repossessed and sold time and time again. This ends up putting consumers in a worse position than they were in before as they have now lost the down payment, owe the deficiency, and are still without a vehicle.

Moreover, the cars that the “buy here, pay here” dealership sell are commonly older model cars that have been purchased from various automobile auctions and are now being sold at an inflated price with correspondingly high interest rates. Many of the purchasers of these vehicles quickly begin to experience mechanical issues soon after driving off the lot. The added expenses resulting from the car repair bill increases the likelihood that the purchaser will be unable to meet the other financial obligations due under the “buy here, pay here” purchase and finance agreement.

If you are being pursued by a “buy here, pay here” dealership for the deficiency on a car loan, it is important that you keep all of the documentation that you receive from the dealership and meet with a consumer protection attorney as soon as possible.

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