"Buy here pay here" (BHPH) means the dealership sells you the car and also finances it, so you make your payments to the dealer instead of a bank. California defines a buy-here-pay-here dealer in Vehicle Code §241: a dealer that sells or leases on installment contracts and keeps more than 10% of them, assigning less than 90% to outside finance companies within 45 days. BHPH dealers must follow extra California rules: a mandatory 30-day or 1,000-mile warranty, limits on GPS tracking and starter-interrupt devices, payment rules, and a ban on using unlicensed repossessors.
Educational information only. This article is not legal or financial advice. Buy here pay here is a heavily regulated business; talk to a California attorney before you finance cars yourself.
In this article
- How buy here pay here works
- California's legal definition
- Rules that apply only to BHPH dealers
- Repossession rules
- Where BHPH dealers get the money
- Frequently asked questions
How buy here pay here works
| Traditional dealer financing | Buy here pay here | |
|---|---|---|
| Who lends the money | A bank, credit union or finance company | The dealership |
| Who collects payments | The lender | The dealership |
| Who takes the risk if the buyer stops paying | The lender | The dealership |
| Typical buyer | Buyers who qualify with outside lenders | Buyers with limited or damaged credit |
| What the dealer needs | Lender relationships | Cash to carry the loans, plus collection systems |
Every BHPH sale is still a retail installment sale contract governed by California's Automobile Sales Finance Act (the Rees-Levering Act, Civil Code §2981 and following).
California's legal definition
Under Vehicle Code §241, a buy-here-pay-here dealer is a licensed dealer (Vehicle Code §285) that:
- Enters into conditional sale or lease contracts governed by the Civil Code, and
- Assigns less than 90% of its unrescinded conditional sale and lease contracts to unaffiliated third-party finance or leasing companies within 45 days of signing.
A deal the buyer pays off in full within 30 days doesn't count as a conditional sale contract for this test. In practice: if you keep more than 10% of your financed deals in-house, California treats you as a BHPH dealer.
Rules that apply only to BHPH dealers
| Rule | What it requires | Source |
|---|---|---|
| Mandatory warranty | A written warranty on used vehicles sold at retail, lasting at least 30 days or 1,000 miles, whichever comes first. It covers at least 14 component groups (engine, transmission, brakes, steering, airbags, emissions and more), with the dealer paying 100% of parts and labor | Civil Code §1795.51 |
| GPS tracking | Allowed only with clear disclosure and the buyer's written consent, and only for limited purposes such as servicing the loan or locating the car for repossession | Civil Code §2983.37(a)(1) |
| Starter-interrupt devices | Must be disclosed in writing at the sale. Warnings must go out 5 days ahead (weekly-payment contracts) or 10 days ahead (others), plus a final warning at least 48 hours before disabling. The buyer can start the car in an emergency for at least 24 hours after it's disabled | Civil Code §2983.37(a)(2) |
| Payments | You can't require buyers to make payments in person (the down payment is excluded) | Civil Code §2983.37(b) |
| Market value label | Post a "Reasonable Market Value of This Vehicle" figure from a nationally published guide on each vehicle for sale | 2012 AB 1534, as summarized by IADAC |
| Repossessors | You can't use unlicensed repossessors. Knowingly doing so is a misdemeanor with a fine of up to $5,000, and DMV can suspend or revoke your license | DMV Industry News (2015) |
Violating the tracking, starter-interrupt or payment rules in §2983.37 is a misdemeanor, with a fine of up to $2,000 per violation.
Repossession rules
- Use a licensed repossession agency. Agencies are licensed by California's Bureau of Security and Investigative Services (BSIS), and BHPH dealers can't use unlicensed repossessors.
- Send the Notice of Intent. After repossessing, you must give each person liable on the contract at least 15 days' written notice before you sell the car, by personal service or mail. It must explain their rights to redeem the car (pay it off) and, where they apply, to reinstate the contract (Civil Code §2983.2).
- Know the deficiency rules. You can collect a remaining balance (a deficiency) only if the notice was given properly and within 60 days of the repossession.
- Account for the sale. On written request within a year, you must provide a written accounting of the sale within 45 days. If the sale brings in more than is owed, you must account for and return the surplus within 45 days.
From experience (Garrett Eddings, professional opinion): A lot of buy here pay here dealers are anticipating that they may have to repossess the vehicle. So keep detailed notes on every account, and be as thorough as possible with your paperwork.
Where BHPH dealers get the money
From experience (Garrett Eddings, professional opinion): The dealer acts as the lender, which is why they need their own cash. Can they sell off the debt after a certain period of time? Yes, they certainly can, but I'd say that's typically not the model.
Carrying your own loans ties up cash until buyers pay. Many BHPH dealers also need a line of credit to keep buying inventory. See How do used car dealers finance their inventory?
Frequently asked questions
What does buy here pay here mean?
The dealership finances the car it sells, and you make your payments to the dealer instead of a bank or finance company.
What makes a dealer a buy here pay here dealer in California?
Vehicle Code §241: a dealer that enters into conditional sale or lease contracts and assigns less than 90% of them to unaffiliated finance or leasing companies within 45 days.
Do California buy here pay here dealers have to give a warranty?
Yes. Civil Code §1795.51 requires a written warranty of at least 30 days or 1,000 miles, whichever comes first, covering major components at no cost to the buyer.
Can a buy here pay here dealer put a GPS or kill switch on the car?
Only with written disclosure and consent, and only for limited purposes. Starter-interrupt devices require advance warnings and emergency-start access under Civil Code §2983.37.
Do buy here pay here dealers report to credit bureaus?
Some do. It's not required. See Do buy here pay here dealers report to credit bureaus?
Related questions
- Do buy here pay here dealers report to credit bureaus?
- How do independent dealers offer customer financing?
- Starting a buy here pay here dealership in California
- Back to the California Dealer License FAQ
Next step: Start the 6-hour DMV-approved course for $99
Resources
- California Vehicle Code §241, buy-here-pay-here dealer definition (Opens in new window)
- California Civil Code §1795.51, BHPH warranty (Opens in new window)
- California Civil Code §2983.37, tracking, starter interrupt and payments (Opens in new window)
- California Civil Code §2983.2, notice after repossession (Opens in new window)
- DMV Industry News: new requirements for buy-here-pay-here dealers (Opens in new window)
- IADAC: 2012 buy-here-pay-here bills explained (Opens in new window)
- California Civil Code §2981, Automobile Sales Finance Act (Opens in new window)
Sources: the code sections and DMV notice linked above · IADAC summary of AB 1447 and AB 1534 (Opens in new window). Verified 2026-10-16.
This article is for educational purposes only and is not legal or financial advice. Buy-here-pay-here laws are detailed and change; read the current code sections and consult a California attorney before financing vehicles. The instructor notes reflect one instructor's professional experience and opinion.