Capital for the LHPH Industry

Creating financial flexibility one dealer at a time

Flexibility to Adapt to Changing Market Conditions

Kevin Londerholm | October 15, 2019

Market conditions in the Auto industry are changing rapidly, which can be disruptive or create opportunity. You may ask yourself; how can my dealership adapt to these new products, ideas, and generation of consumers?

  • Economic cycles
  • Vehicle technology
  • Consumer affordability relative to vehicle cost
  • Ride-share programs
  • Subscription models
  • New ownership models
  • Changing wants and needs of the younger generations

The more flexible your business model, the greater ability you have to adapt to changing market conditions. So, how can you become more flexible? One increasingly popular way to be competitive with the listed factors above is to incorporate a Lease-Here, Pay-Here model. Using a lease as your financial instrument provides the ability to overcome consumer affordability challenges, offer programs for your ride-share drivers, create your own subscription agreement, and maintain your flexibility for whatever is over the next horizon.

Find out more about how an LHPH model can help you effectively navigate rapidly changing market conditions by reading our E-book.

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Lease-Here, Pay-Here and Consumer Affordability as Used Car Prices Rise

Trevor Watson | September 30, 2019

The average price of a used car increased 14.8% between 2013 and 2017, and it continues to rise in lock step with new car prices.  As a result, the average monthly car payment has grown year-over-year.  This can be a strain on any car buyer, but particularly for the credit-challenged customer of a Buy-Here, Pay-Here dealership.

Lease-Here, Pay-Here provides an answer to the affordability issue.  Thanks to the structure of a lease, a LHPH dealer can roll a customer on a higher price vehicle and offer that customer the same or lower monthly payments than their BHPH competitor can offer on a cheaper unit.  This means LHPH dealers can adapt to the changing market, lease newer model year vehicles with lower mileage, and still maintain consumer affordability without extending term.

We recognize that affordability and the quality of your vehicles are important to your customers, and to your bottom-line. The Lease-Here, Pay-Here model provides an opportunity to move more units and create new revenue streams, while making it easier for your customers to obtain a vehicle from you and pay full term.

To find out more information about the LHPH model and LHPH Capital’s funding program, click below to read our E-book or call us at (619) 222-9990 ext. 1010.

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BHPH vs. LHPH

By: Caitlin Luke & Zanah Naji  | August 19, 2019

Beyond the positive impact of Federal Income Tax deferral and cash flow enhancement from “pay-as-you-go” sales tax, when the Lease-Here, Pay-Here model is compared with the Buy-Here, Pay-Here model, the benefits of leasing for auto dealers are numerous.

Benefit BHPH LHPH
Return on Asset – Original markup of the car
– Interest received on monthly payments
– Life of the asset per dealership: One turn 
– Original markup of the car
– Rent Factor (interest) received in monthly payments
– Life of the asset per dealership: Two to three turns before end of life
– Markup and Rent Factor on each additional turn
Associated Fees for the Dealer – None – Acquisition Fee
– Purchase Option Fee
– Disposition Fee
– Security Deposit
– Excess Mileage Fees
– Excess Wear & Tear
Affordability for the Customer as the Market Price of Vehicles Increases – Credit challenged customers struggle to meet high monthly payment amounts
– Options are buying cheaper cars or extending loan terms
– Higher chance of loan defaulting
– Credit challenged customer has smaller payments than a similar BHPH vehicle
– No need to extend term to keep the payment down
– Better portfolio performance
Inventory Quality – Dealers forced to sacrifice quality of inventory
– Must buy older vehicles with higher mileage
– Faster deterioration of lower quality vehicles 
– Result: Increased service, increased collections, increased repossessions, and reduced profitability 
– Dealer can buy higher quality inventory for same monthly payment to the consumer
– Opportunity to recycle inventory two or three times (sometimes more)
– Result: Reduced service, reduced collections, reduced repossessions, and increased profitability
Competitive Advantage – Low
– Dealers sacrifice quality and profitability to meet customer affordability
– Saturated market
– High
– LHPH dealer able to offer customers newer model and lower mileage at the same monthly payment as an older BHPH car
– No need to sacrifice quality and profitability
Customer Retention – Standard communication when customer makes payments
– At the end of loan, the customer might return to trade the vehicle, or they may pay off the vehicle without communication
– Minimal opportunity to retain
– Communication is increased as customer comes in for both monthly payments and maintenance
– When customer ends their lease, they must return to the dealer with the vehicle
– An additional opportunity to sell the unit for residual, or lease them another vehicle

To speak with a LHPH employee more about the differences between LHPH and BHPH, please contact us at (619) 222-9990 x 1010.

Or download our FREE E-Book and learn more below:

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Top 5 Lease-Here Pay-Here Advantages

By: Kevin Londerholm   October 29, 2018

When talking to dealership owners, managers, and employees at industry conferences and at our San Diego office, we are frequently asked what the benefits are for running a lease-here pay-here program as opposed to a buy-here pay-here program.

Among the numerous benefits that used car leasing can provide a dealership and its customers, we listed the Top 5 Advantages for Lease-Here Pay-Here below:

  1. Federal Income Tax Advantage:The NEW TAX LAW provides a huge tax advantage with the ability to utilize 100% bonus depreciation of used vehicle assets in the first year until 2023. The dealer can defer all up-front profit and may not pay much income tax (if at all) for years to come.
  2. Sales Tax Advantage:Benefit both the customer and the dealer. 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, acquisition fee). The dealer doesn’t lose the entire down payment to sales tax and can be cash positive at the inception of the deal.
  3. Competitive Advantage:Is a direct result of the dealer’s ability to offer the customer a better car for the same payment without losing profit. This allows the dealer to compete with the aggressive subprime lenders and lease much higher ACV vehicles.
  4. Collateral Control:The dealer has ownership of the leased vehicle (asset) and can recover the vehicle easier and often faster because the dealer is named on the title.
  5. Residual Cash Flow:Is the most dynamic aspect of leasing. Once the dealer’s lease portfolio matures and the leases have completed their terms, the dealer experiences an astonishing influx of cash either by leasing the paid off vehicle again or by wholesaling the vehicle.

Our current LHPH dealer clients and their customers enjoy these benefits, among many others, due to offering a leasing program as their main product.

We would love to discuss these advantages with dealers interested in offering a lease-here pay-here program via a phone call (619-222-9990) or email.

If your dealership is already offering used car leasing to your customers, we especially want to hear from you!

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