Is Buy Here, Pay Here Financing Different From Traditional Car Financing?
How the 1970s Savings and Loan Crisis Inspired a New Way to Purchase a Used Car
There’s no doubt that the 1970s savings and loan crisis inspired the creation of buy here, pay here dealerships - but what exactly is the savings and loan crisis? And is buy here, pay here financing really that different from traditional car financing?
Fasten your seatbelt, because you’re about to travel through time with Quick Auto, as we break down the turbulent history of the savings and loan industry and bring you back to the future with a better way to pay for your next vehicle.
How Did the Savings and Loan Industry Get Started?
Savings and loan (S&Ls) began with the pursuit of homeownership in the 1800s, when banks did not lend money for mortgages. People who wanted to own land, but didn’t have a way to pay for it pooled their savings together.
Then, they would loan their money to someone else in the group to finance a home purchase.
As they repaid the loan, they could then loan the funds to other members of the group.
Eventually, these organized groups of lenders and borrowers formed “thrifts,” which are much smaller than banks with smaller assets. They were a big player in the U.S. mortgage market, nevertheless.
By 1980, there were nearly 4,000 thrifts in the U.S. that had assets that totalled about $600 billion dollars, and $480 billion were in mortgage loans.
Buy Here, Pay Here Bonus Fact: This represented almost half of the nearly $960 billion dollars in mortgages outstanding in the U.S. at the time.
S&Ls Hit a Downward Slide in the 1980s
The U.S. had their eye on the S&L industry for quite some time. In fact, they had placed restrictions on the industry with the Federal Home Loan Bank Act of 1932, which limited their ability to compete with larger lenders by capping interest rates on deposits and loans.
While the Federal Home Loan Bank Act of 1932 didn’t initially hurt the savings and loan industry, it did cause its demise by the mid-1980s.
A recession hit Americans hard. Our economy was shifting from being manufacturing-based to being service-based, and many people lost their jobs. Add in high-interest rates set by the Fed to bring down inflation, and the S&L industry lost about $4.1 billion dollars a year in profit by 1982.
In response, President Ronald Reagan eliminated most of the restrictions on the S&L industry. However, this allowed S&Ls to invest in riskier commercial real estate and, even worse, junk bonds.
This caused chaos in the banking industry and made it impossible for hard-working Americans to secure loans for vehicles or houses.
They assumed their investments would pay off, but it was the taxpayers who ended up footing the bill. In the end, the U.S. government reformed the savings and loan industry with the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which resulted in the liquidation of more than 700 S&Ls.
Buy Here, Pay Here Bonus Fact: The popular term “Reaganomics” came about in the 1980s, when many Americans watched as President Ronald Reagan’s unorthodox approach to economics made an impact on areas like job growth and public debt.
The Damage Had Already Been Done
As Americans recovered their finances and found new careers in a service-based industry, they still had to contend with what the S&L crisis did to their credit. Not only did many people see their credit score sink, they also didn’t have access to auto loans.
Once banks saw the smallest bump in the road with your credit history, you were automatically turned down for an auto loan. This left Americans without reliable vehicles and used car dealerships with a lot of vehicles they couldn’t sell.
That’s when used car dealerships took car financing into their own hands, by forming RFCs (related finance companies). This allowed them to finance and sell a used vehicle all in the same place, without third-party approval from a bank.
Car dealerships transformed the way Americans purchased high-quality used vehicles with a simple idea: Buy your car here, and pay for your car here.
Buy Here, Pay Here Bonus Fact: Even today, most banks turn you down for car financing because of the smallest discrepancy in your credit report. This means buying a vehicle at a traditional used car dealership near you is still very difficult for many Americans just like you.
The Rise of Buy Here, Pay Here Dealerships
Buy Here, Pay Here dealerships are a modern way of buying a used vehicle. That’s because they look at the person and not their credit report. If you have a job and a permanent residence, you're most likely approved for buy here, pay here financing - even if you have bad or zero credit.
At Quick Auto, we can get you approved for vehicle financing and behind the wheel of a nearly new car, truck, or SUV in as little as thirty minutes with all the right documents. Just bring us:
We have seven buy here, pay here dealerships near you! Come see our team in Elkhart, Hammond, Highland, La Porte, Mishawaka, Portage, and South Bend. We’d love to get you approved for car financing today!
Buy Here, Pay Here Bonus Fact: Quick Auto buy here, pay here dealerships bring car financing even more into the future with the ability to conveniently make your car payments online, over the phone, or in person.
Some Things Are Better Left in the Past - Like Traditional Car Financing
Checking your credit report to approve someone for car financing is so 50 years ago! It’s time to experience a modern way to buy a used car at a Quick Auto buy here, pay here dealership, where you can drive away in an affordable, high-quality used car in an instant!
You can even get approved for buy here, pay here financing online. That means you can find and finance a used car within your budget from the comfort of your couch. Click here to get started, contact us online, or visit one of our used car dealerships near you today!