BHPH to LHPH: Make the Switch!
Eyo Toe & Kevin Londerholm | September 14, 2020
Watch below as Terry Bowdler, Founder & CEO of LHPH Capital, explains the Sales Tax Advantage that LHPH has over the BHPH model. With traditional Buy Here Pay Here lending on retail installment sales contracts (RISC), state sales tax is paid at the time of the transaction on the sales price of the vehicle. This means the dealer uses the entire down payment for sales tax and is immediately cash-negative at the inception of the deal.
For LHPH deals in “pay-as-you-go” states, the sales tax is calculated only on the actual monies collected by the dealer (i.e. down payment, first payment). Sales tax is then remitted to the state on each lessee payment received for the remainder of the lease. With this structure, the dealer can pay sales tax over time, rather than all up front. This helps dealers start loans on a cash positive basis, requiring less capital to growth the business as well as better unit economics throughout the life of the lease.