In-House Financing Guide: What Is It And Is It The Right Choice For You?

In-house financing is a financing solution embraced by numerous car dealerships. 

When purchasing a car, a person can usually take two main options: paying the entire cash amount upfront at the dealership or choosing to finance. 

And when it comes to loan options, there are some common ways one could consider: obtaining a loan from banks, credit unions, or from some other lender.

When retailers extend in-house loans to their customers, it means they don’t go through a financial institution, like a bank or credit union, or third-party company to finance the car, but that the dealership will finance the car for you. In other words, it’s an instant point-of-sale loan offered to a customer without requiring a visit to a bank.

Why Would I Want To Go With In-House Financing?

Banks and lenders have strict requirements for the car financing they provide to clients. So this causes a problem for some people that need a car but don’t have good credit to get auto financing through banking.

When you finance through a car lot with in-house financing (also called a buy here, pay here car dealership), you aren’t held to the strict stipulations lenders or banks usually have. It allows borrowers to get a car while having bad or no credit.

Our dealership, King of Cars, offers a genuine ‘buy here pay here’ in-house financing model. This approach allows a person with low or no credit scores to purchase and finance their dream vehicles, opening up opportunities for a wider range of vehicle models.

How Does The In-House Financing Process Work?

With an in-house financing option, the car buyer can purchase their desired vehicle directly from a buy here, pay here dealership, and then the dealership will finance the purchase themselves.

You start by browsing the vehicles in the inventory of the dealership and choosing the vehicle you want. Then you submit an application with some proof of income (we require two recent paycheck stubs), a current utility bill, driver’s license, proof of insurance, and a down payment to get financing.

Once financing is approved (the experience is pretty quick — usually takes less than an hour) and the agreement contract is signed, you can drive away in your car.

The borrower can then make scheduled payments directly to the dealership based on the agreed payment plan.

If you’re someone with a poor credit history, no credit at all, or facing challenges that make approval difficult through traditional financing options like a bank or a credit union, in-house financing will usually be your best bet to getting the car you want.

Is A Credit Check Required For The Approval Process?

We only check credit to confirm basic details provided during the paperwork to check eligibility. For example, address and maybe bankruptcy status. We don’t delve into credit scores, debts, or past repossessions like banks do in checking your credit score. It does show up as a hard inquiry on your credit report.

What Are The Advantages Of Going With In-House Financing?

Here are some of the benefits to getting in-house financing:

  • Credit history isn’t important:  Car buyers who have poor or no credit history stand a better chance of receiving approval for their loan applications. As stated, in-house financing car dealers aren’t concerned with the details of a credit report. King of Cars only verifies basic information through a credit check.

  • The second auto loans come with easy approval: A second auto loan option is possible, even in cases where banks have previously denied approval, as long as you have the funds to provide the necessary down payment and you can pay. The second loan can be extended to any member of your family, including your spouse, child, or any other eligible individual.

  • Possibility of credit improvement: Not all in-house dealerships do this, but some report payments to the credit bureaus, which would help you build your credit.

  • Convenient purchasing process: Undoubtedly, it’s the swiftest and simplest method to secure a car loan. Saving people from spending extra hours or days seeking pre-approval from third-party institutions. At the same dealerships, and sometimes within the same day, the entire process is seamlessly handled.

What Are The Drawbacks To In-House Financing?

Here are a few cons to getting an in-house loan:

    • Shorter loan terms: In-house financing loan terms typically run shorter compared to banks and other financial institutions. While banks and financial institutes may offer financing over 5 years (60 months), in-house financing generally spans around 36 to 42 months. Essentially, the car dealer must be paid off within 3 years. Subsequently, the car owner will have positive equity, enabling them to either trade it in or sell it.

    • Higher interest rates: When you have good credit, one of the rewards is getting a lower interest rate on your loans. In contrast to getting a traditional loan, the interest rate for in-house financing is higher. There’s a fixed annual rate of 18%, which is the special best rate offered by King of Cars. In Texas, (where we’re located) the maximum rate is 26%, which a lot of buy here, pay here dealerships have that rate. You’d be hard pressed to find anywhere else that would be lower than 24% interest.

    • No building of credit: Like mentioned in the advantages, some dealerships do report credit, but others don’t. If the dealership doesn’t report the payment history to the credit bureau, then you won’t be able to build credit through an in-house loan.

    • No possibility of getting a new car: In-house financing dealerships specialize in used cars, so there’s no possibility of acquiring a new car through this financing option.

The main takeaway from this is that a traditional loan will be a better option when it comes to car loans. However, not everyone will have that option when they don’t have good credit. There’s a reason the banks and lenders are saying no and an in-house financing dealership is able to say yes, and that comes with a premium. 

But with an in-house loan, the number of your credit score isn’t an obstacle to you getting a car (and one you’d actually like). That’s the main advantage of in-house financing. The pros are, if you have the money for a down payment and a stable income, you can get yourself a good vehicle.

Tips For What To Watch Out For When Purchasing A Car Through In-House Financing

When planning to purchase your next vehicle through in-house financing, it’s crucial to distinguish between the best “Buy Here Pay Here” dealers and less reputable ones. Here are some things to look for when assessing which car lot you want to deal with:

    • Make sure they have a service department: if the place has it’s own services department, that likely means they are doing their own due diligence on the vehicles – inspecting them and making sure they are ready to drive. If they don’t have one on site, you may want to deal with a different business.

    • Make sure their vehicles go through an inspection process: It’s also important to ask questions about the vehicle inspection process; for instance, at King of Cars, we conduct 89-point inspections, including road tests and thorough examinations of the vehicle’s undercarriage. This ensures that the customer receives a high-quality vehicle that they can maintain with ease once purchased.

    • Ask for a Carfax report: A credible dealership should offer a CarFax report if you ask for it. These reports offer insight into the vehicle’s history, including past accidents, damages, and ownership records. By thoroughly examining Carfax reports, you can make an informed decision and ensure that you’re dealing with a trustworthy dealer. We provide these free of charge to our customers.

    • Make sure vehicles come with warranty: you should inquire about the types of warranty that come with the purchase of the vehicle, the duration and coverage details, including whether it’s complementary and if there’s an option to purchase an extended warranty. Ask about any service contracts, associated costs & fees, and additional information.

    • Check Google reviews: Do some research to make sure customers are walking away happy from the deals they get at the car lot. Google reviews are a good source for this research. You probably want to go with someone with over a 4-star rating and lots of good reviews to back that rating up. Find out if they value great customer service (over just sales), their team meets the needs of their clients, and have fair business practices.

    • Check to see if their pricing is transparent: you should be able to easily see or receive each vehicle’s asking price, down payment price, the weekly/bi-weekly/monthly payment installment, and financing terms.

    • Check to see if they have easy payment options: It can be really inconvenient if you are subject to only one way to make payments. Here at King of Cars, we accept cash, money orders, cashier checks, credit cards, debit cards, and wire transfers. We even have the convenient option of having an online account. This allows you to see all your account information (like viewing your balance amounts, your payment history and due dates, payoff information, etc.), make payments, and update your personal information all from the comfort of your home.


If you’re someone looking to own a vehicle but have bad or no credit, in-house financing presents a friendly option. Reach out to us directly (if you’re in Houston or surrounding areas) or fill out the form provided here to learn more and start working towards making your vehicle ownership dream a reality soon. You can also take a look at the variety of our vehicle selection to see if something suits your tastes and current financial situation.