House Financing is making a comeback in the Canadian market. When I entered the car business in 1995, there were very few options for people with credit issues such as bankruptcy, written-off accounts, judgments, or collections to obtain financing for a reliable vehicle. I was lucky enough to work for a dealership with an in-house leasing company, and we could sell cars to these people before the subprime lenders came on the scene.
Over the past several years, many companies have come into the Canadian automotive financing market to fill the needs of most of these customers. They are relatively large national and international financing companies. They have signed most dealerships across the country to refer business to them. In 2005, no fewer than seven such companies were doing business nationwide, with many others doing business in certain markets. When writing this article in 2010, there were only four remaining, and they had tightened their lending practices because there was less competition in the marketplace. Of note, the three subprime lenders doing business across Canada that are no longer in the marketplace were international lenders, with two of the three based in the United States. When the financial crisis occurred in America, we lost them due to their parent companies consolidating their operations in the United States.
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This tightening of lending practices is beginning to create a need for in-house financing at the dealership level again. Today, more and more clients have credit problems and need special financing solutions as they no longer qualify for the funding from mainstream subprime lenders.
Many car dealerships are growing tired and frustrated at spending a lot of time and money advertising to get customers into their dealerships to sell them a car to have the lenders turn their customers down. This frustration has led many of them to take another look at an old concept and begin financing these customers themselves. So slowly but surely, House Financing, House Leasing, and Buy Here Pay Here programs are starting to pop up nationwide to service this new marketplace.
There is very little difference in the various financing programs from a consumer point of view. They all work the same way. You have to give them a down payment that the dealers require to offset the risk they are taking in financing these types of high-risk clients. Most down payments range between $500 – $2000 and are used as money down on loan in In-House Finance and Buy Here Pay Here programs. The out-of-pocket money is used as a security deposit and first payment in most in-house leasing programs. The security deposit can be used to buy out the lease at the end of the term without coming up with any money out of your pocket. No matter what the money you give, the dealership is called, and by the end of the term, it is used to pay down on your vehicle.
The other major difference in these programs is how the Registry of Motor Vehicles registers vehicles in your province. With the In-House Financing programs, the car is registered in your name on the registration, and a chattel mortgage is placed on the vehicle at the Registry of Deeds in your province. The chapel mortgage makes it possible to repossess your vehicle if you default on the loan the same way a bank or finance company can. With the In-House Leasing programs, the car is registered in the leasing company’s name, with you being reported as the plate owner of the vehicle. The Buy Here Pay Here, a smaller dealership usually runs programs, and they sometimes write a chalet mortgage like the In-House Financing Program. Still, often, they get the customer to register the vehicle in their name and then return to the dealership with the ownership paper and sign it over to the dealership. This way, if the customer defaults on the loan, the dealer registers the vehicle back into their name and repossesses it from the customer. It doesn’t matter which program you choose to use. If you don’t make the payments, they will repossess your car, but if you do, you will not have any problems. Remember, all of these dealerships are interested in you keeping your vehicle. They usually understand if you will be a couple of days late with your payment if you let them know beforehand and make arrangements to get caught up immediately.
These dealers live in their work areas and are usually very helpful and willing to work with you. Most of these dealerships require that you place full coverage insurance on your vehicle. Still, some of the smaller Buy Here Pay Here dealers will allow you to have basic car insurance because the vehicles they sell are usually fairly inexpensive. Full coverage insurance doesn’t make sense.
The hardest thing about financing a vehicle through these dealers is usually finding them. With so many dealerships advertising Guaranteed Auto Approvals, Bad Credit – No Credit Car Financing, and the like, most do not have many options if the national finance companies decline you. You end up spinning your wheels looking for a dealer who will work with you, causing you to either give up or get frustrated and buy a cheap car privately with whatever money you can come up with.
To try to solve this problem by finding these dealerships, a new website is launched called. Its sole purpose is to connect people who need special in-house financing options with dealerships in your area that provide house financing. Most dealerships on the website will have their own in-house financing companies, with some having the Go Plan program. The Go Plan is a special financing program through Carfinco, a national financing program that is very close to an in-house program.
A word of caution about these programs: remember that these programs are designed to help you re-establish your credit and get you into a reliable vehicle at a reasonable payment. It would be sporadic that one of these companies will finance a 2009 Chevy Silverado Diesel or 2010 Ford Mustang GT for you because their programs are not designed for that. But if you are serious about buying a vehicle and re-establishing your credit, they are a good option.
