How to Start a Buy Here Pay Here Dealership

October 27th, 2022

In this article, we'll be learning how to start a buy here pay here (BHPH) dealership. We'll start with a detailed description and then move on to the pros and cons of starting a BHPH dealership. After that, we'll detail the who, where, when, and hows of creating your BHPH dealership.

How is buy here pay different from retail auto sales?

The main difference from retail sales is that in the BHPH model, you fund the deal yourself. You've probably heard buy here pay here referred to as in-house financing; this is a perfect description. You're taking on the responsibilities of a finance company instead of selling the loan to a lender.

What are the pros and cons of in-house financing?


  • In-house financing accounts for 10% of total vehicle sales per year.

  • The percentage of total vehicle sales purchased from BHPH dealers has increased five years in a row.

  • You can offer flexible lending options.

  • You can serve a wide range of customers and help improve their credit.

  • The profits you gain from the loan maturation can be significant.

  • You can adjust your interest rates as necessary.

  • You can become part of the fabric of your community by providing this service well.


  • A significant financial risk is a potential barrier to entry.

  • Your ability to judge creditworthiness is a critical skill for a BHPH dealer.

  • You can lose money quickly if you don't have a strong understanding of the accounting involved.

  • You need to be patient, primarily if you use a flooring company.

  • Your current DMS system probably does not handle BHPH.

Who should start a buy here pay here dealership?

Any dealership in retail sales is passionate about helping people get quality vehicles and improving their credit. As a BHPH dealer, you have a more significant opportunity to help your community by supporting your most credit-challenged neighbors. In many parts of the country, a reliable vehicle is necessary to find and keep employment. 

How to start a buy here pay here dealership?

There are a few keys to keep in mind when offering in-house financing: 

Capital & Compliance 

You're going to need inventory. On average, a buy here pay here vehicle ranges from $1,000 to $15,000. For most, this should be well within your budget. Remember that you're giving the car to the buyer with no more than the money down and a promise to pay the payments. 

You'll also need to follow your local underwriting guidelines to maintain compliance with your contracts. 

Market Fit 

Like in any business, you need to determine whether the demand in your area is enough to support your business. The average buyer is 35 years old and is working-class or working-poor. Seniors living on a fixed income and young people working entry-level jobs are also well represented in this group. 

In most cases, BHPH customers do not have the option of traditional car buying. This can be due to various factors, including financial difficulties and credit worthiness. 

Do some research on the demographics of your local area to get a more accurate reading. The number of existing BHPH dealerships is a good indicator of the strength of the market in your area. 

Sales Team 

Your sales team is very important in any dealership. But the risks of lending your own money require a type of discernment that is not common in retail sales. You aren't just trying to make a sale; you're looking for a good fit. 

BHPH Software

You'll need proper software to handle loan servicing and the specifics of in-house financing. Most DMS systems on the market are not equipped with the tools you need to manage a buy here pay here car lot. 

Your team must always treat your customers with dignity and respect. This is critical to building trust with the community over time. A BHPH dealership can and should be vital to the local community.

Inventory Choices

Last but not least, for BHPH, you need the proper inventory! The most popular vehicles will be on your competitors' lots. So again, we strongly recommend checking your local competitors out.

We hope you've enjoyed our article on how to start a Buy Here Pay Here dealership. Leave a comment below if you enjoyed it, and please subscribe to our mailing list!

Learn More About How to Manage a Buy Here Pay Here Dealership with DealerClick.

Joshua Aaron
By Joshua Aaron - October 27th, 2022