Capital for the LHPH Industry

Creating financial flexibility one dealer at a time

The Effects of Term Adjustment in a BHPH Loan vs. Lease

Eyo Toe | May 17, 2021

What are some solutions to the affordability aspect for dealers and consumers in today’s market? Check out this video explaining how leases can be structures to fit your unique customer base and dealership by comparing a BHPH loan to a LHPH lease.


Three Reasons Leasing Differentiates Your Dealership

Eyo Toe | May 12, 2021

Nick Markosian, CEO of Markosian Auto, talks about how leasing has elevated his dealership by increasing his average ACV, shortening terms, and newer model year. Nick explains some of the benefits of affordability and why it makes the LHPH model so appealing.


Affordability Is Driving Lease Programs

Eyo Toe | May 10, 2021

How can you keep your customer payment affordable as used car prices continue to increase? At first thought, the solution might be to extend the term. The infographic above shows what an extended term looks like in a Lease Contract versus a Retail Installment Sales Contract (RISC). Using the same IRIL or APR equivalent and vehicle retail value, the customer payment fluctuates depending on the length of the term.

A car of $14,000 value could be used for a 36 or 42 month term by adjusting the residual value to either 40% or 45% while maintain an affordable monthly payment for the customer. In order to get a payment similar to the 42 month lease ($404) the RISC would need a term of 54 months to get a similar payment ($403).

A Lease Contract is not only beneficial for your customer by providing a more affordable payment, but also for your dealership portfolio as shorter terms are associated with decreased delinquency, reduced charge-offs, and better overall performance.


Joe Segrave: The Dealer Perspective of Affordability

Eyo Toe | May 5, 2021

Joe Segrave, Founder of Benchmark Auto, speaks on his experience navigating the increase of used car prices and how it has affected his customers. Joe provides a dealer’s perspective on how the affordability benefit of LHPH has been exponential especially in the last year.


How Do New Car Prices Affect Subprime Affordability?

Eyo Toe | May 3, 2021

Last week Black Book reported yet another increase in their Weekly Wholesale Index up 1.60% from the previous week. Increased demand from consumers and low supply continue to be a challenge as wholesale prices rise and the new car supply continues its ongoing shortage.

In addition, Auto Finance News reported that Huntington Auto Finance experienced a 20% decline in floorplan assets during Q1 of 2021. With their portfolio consisting of mostly franchise floor plans, this gives insight to the domino effect of the lack of new car supply transitioning to used car supply for BHPH and LHPH dealers.

Analysts in the WSJ are predicting that the supply and demand will not balance out until the second half of 2022. What does this mean for dealers in the used car industry? Dealers will need to realize the most value out of their assets and find innovative ways to meet their customers’ needs. Subprime customers will be the most impacted consumer group as many require transportation for work and are not able to pay a higher car payment if prices continue to rise over the foreseeable future.

Affordability is a benefit for not only lease-here-pay-here dealers but for their consumers as well. In pay-as-you-go states, dealers are able to keep the entire down payment rather than pay sales tax on the full sales price upfront, allowing them to reinvest that money into additional cars or reconditioning. Those vehicles can also be leased two to three full-term leases before cashing it in for its residual value.

Leasing can also take the burden of increased car prices off of your customer when they lease a vehicle. Because many of the lease variables are adjustable and includes a residual, the customer payment can stay at an affordable level as the uncertainty of 2021-2022 car prices continue.


How Are Used Car Price Increases Affecting Dealerships?

Eyo Toe | March 15, 2021


Manheim posted an update on used car prices this week. Their Vehicle Value Index reports that the used vehicle market continues to be competitive as prices soar YOY and even from the previous month. Manheim reports that in February, the used car value index increased 17.9% YOY and 3.79% from January.

How do dealers combat the challenges of increasing used car prices and the affordability aspect for their subprime customers? There are a few options when looking at the long-term effects of increased car prices.

One option is to extend the term of the retail installment sales contract in order to sustain an affordable monthly payment for the consumer. Although this may seem like a quick fix, historically data has shown that a longer term is correlated with increased delinquency and charge offs. When planning for the long-term financial health of your dealership, extending the average term of your notes is risky and could have negative effects on the financial performance of the dealer’s portfolio.

Another option to consider is adopting a leasing program. Leasing is incredibly resilient in a fluid market like the used car industry because it allows the dealer to adjust the many variables of a lease contract including, but not limited to, the agree upon value, interest rate implicit in the lease, residual value, acquisition fees, and more. This flexibility allows you to customize a lease contract for your customer even as used car prices increase without lengthening the term.

LHPH programs are encompassed around the fact that consumer affordability is directly related to dealer profitability. When you are offering your customer a newer, more reliable car for a payment they can afford, it is more likely your customer will successfully complete their lease and you will retain their business for future vehicle leases.

Lease Variables

Eyo Toe | March 10, 2021

The way leases are structured allow the dealer to adjust many different variables in the contract ranging from agreed upon value to the residual value. Learn all about these different variables in this video!


How To Set Residual Values?

Eyo Toe | March 8, 2021

Setting residuals has a stigma of a risky and complicated process due to the new car leasing industry. With used car leasing, residuals are one of the parts of the lease contract that the dealer controls. Setting residuals correctly plays an important part in maximizing the profitability of a vehicle by leasing it for 2-3 full term leases and the selling the car at auction at the end of its lifecycle.

This infographic shows three ways dealers can go about setting residuals. For lower ACV cars, 20% of the agreed upon value is a standard residual calculation which maintains compliance with Reg M (10% residual of the ACV) and ensures the car will be worth at least that value at the end of the lease.

Higher ACV vehicles   allow for the residual to be set at a value which allows the customer to maintain an affordable monthly payment (~$400-$500), without extending term. With a term of 24-36 months, research shows that 30-45% of the car’s value is a safe estimate for the residual value on a higher ACV vehicle.

Lastly, Manheim Market Report (MMR) is a tool that dealers can use to give an accurate estimate of the future car value after the consumer has leased it by adjusting estimated milage, car color, make and model, and more.

Keep in mind, with a well-constructed LHPH program, the goal is to lease out the same vehicle two, three, even four times on full-term leases before you liquidate the asset.  When you are successful in turning these vehicles through multiple full-term leases, if you miss the last residual setting by a few hundred dollars, the vehicle will have already generated a substantial profit for the dealer over a number of years.  Done correctly, residual setting is not a significant risk for LHPH dealers.

If you have additional questions, please reach out to Trevor Watson at

What Does Received Cash Look Like in LHPH vs. BHPH?

Eyo Toe | January 20, 2021

Leasing programs book cash differently that typical BHPH accounting methods. When a vehicle is leased, each payment that comes in from the customer is considered revenue in the accounting world. Although BHPH accounting may show a large note on their books, in reality, they have only received one month’s payment from the consumer. Learn more in the video below!

New Year, New Opportunities!

Eyo Toe | January 6, 2021

Start the new year with growth and profitability and make the most of your assets by adopting a Leasing Program! With BHPH programs, dealers sell used vehicles for a monthly payment until the receivable has been paid off. LHPH programs allow dealers to buy newer, nicer cars and lease them to two or even three customers, significantly increasing the amount of profit made on each car. In addition, dealers are maintaining steady cash flow throughout the lifetime of the car, keep all down payments from each lessee and enjoy the residual cash flow once the car has reached the end of its lifecycle.

Check out this infographic explaining how the return on assets in a leasing program is profitable and competitive.

Have additional questions? Contact Trevor Watson at

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