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What is Lease Here Pay Here (LHPH) Financing?

Lease-here-pay-here is a sketchy form of a buy-here-pay-here dealership. All of the benefits between the two belong to the dealer. For the dealership there are tax breaks and deferments. For the buyer there are nothing but cons to this type of vehicle purchase.

How Lease-Here-Pay-Here Works

In this business model, a person actually leases (rents, so to speak) a vehicle. The vehicle belongs to the dealership until all payments have been met. The leasee’s name is never on the title until then, unlike a car loan, in which the lender merely has a lien on the vehicle’s title. The vehicles are marked up well beyond retail value, then interest is applied. A buyer must make weekly payments. Most dealerships that use this financing method also use the PassKey system. This is an ignition lock that will prevent the vehicle from starting if the buyer is a single day late on a payment. In the event that you do not pay the contract in full, you are not due any money if the vehicle is resold for more than you owed at repossession. Lastly, none of these financing agreements are reported to credit agencies, leaving you with the bad credit that led you to one of the dealerships in the first place.

Alternatives for People with Credit Problems

Just because you have bad credit, you don’t have to go to an LHPH car lot that doesn’t perform credit checks. The subprime auto finance industry is quite strong these days, and there are many more traditional options for the borrower who has a credit score in the low 600’s, or even lower.  The interest rates will be high, yes, but you will be getting a much better deal than you could expect through LHPH or rent-to-own financing. A subprime lender, unlike one of these no credit check lots, will actually report your payment history to the credit reporting agencies, which will give you the opportunity to boost your score by making your payments on time month after month. They are also more heavily regulated by governmental agencies, meaning you will have less risk of being victimized by predatory lending tactics. Let us help you connect with a lender or dealer who can fund your loan, even if your credit is subpar.

About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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