Capital for the LHPH Industry

Creating financial flexibility one dealer at a time

Recognizing Non-Cash Items in Your Financial Statements

Eyo Toe | January 13, 2021

How can you identify actual cash flow in your financial statements? Chad Martin, Fractional CFO and Consultant at Martin Consulting and Management, talks about some of the non-cash items that are part of financial statements and some useful tips on accounting for the differences in cash and non-cash items

What Is the Best Way For a Dealer to Forecast Cash Flow?

Eyo Toe | January 11, 2021

What is the best way for a dealer to forecast cash flow?

A resource that is used commonly in the auto finance industry is a 13-week cash flow model. This model demonstrates about a quarter’s worth of inflows and outflows and is valuable for strategy sessions and determining a dealership’s health as a company. The forecast is broken down into weekly reports, as opposed to monthly, allowing you to picture short term variability and giving you an opportunity to investigate details should any unexpected shortfalls arise.

Forecasting cash flow is much more than taking last year’s cash flow and dividing it by 12. Be sure to incorporate your current metrics and KPIs into a model that works best for you. For example, when you are in a growth scenario you will want to consider certain aspects such as upfront costs, increase in employees, etc. and implement them into your model to get the most accurate forecast.

Cash flow is critical for any dealer, whether they are focused on retail, BHPH, LHPH or a mix.

Have additional questions? Contact Trevor Watson at

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

Cultivate Customer Loyalty in Your Leasing Program

Eyo Toe | December 22, 2020

As 2020 comes to an end, many people are beginning to look back and reflect on this past year. If this year has taught us anything, it is the value of relationships and ability to be resilient. Customer retention is one of the many benefits of having a Lease-Here, Pay-Here program as it gives dealers a number of opportunities to build relationships with customers through their lease contract and even when that contract comes to an end. During the lease, the customer will bring in the vehicle for maintenance and will communicate during transactions and collections.

Post lease, many dealers will provide trade up incentives even before the lease contract expires. With BHPH’s retail installment contract, a customer can go to any dealership and trade their car in. But, with LHPH, the customer is required to bring back the vehicle giving the dealership an opportunity to lease them a new car or sell the customer the car for its remaining residual value. These are some of the ways dealers can develop customer loyalty with an LHPH program.

Why Make the Transition from BHPH to LHPH? 

Eyo Toe | December 21, 2020 

One of the most recognizable faces in Lease-Here, Pay-Here is Nick Markosian, CEO of Markosian Automotive in Taylorsville, Utah.  Nick has been in the car business for 30 years and has run a successful retail and BHPH business through his three locations. In 2017, Nick made the transition from BHPH to LHPH and he never looked back.  He is now up to 3,000 accounts in his portfolio and continues to grow in a steady, sustainable, and profitable fashion. 

Learn more about his reasons for making the transition by reading this recent article about him in the December 2020 addition of BHPH Dealer magazine 

And hear Nick explain some of the benefits of LHPH in this clip from the 2020 LHPH Virtual Summit:

 To learn more about Lease-Here, Pay-Here and how to make the transition from BHPH, download our free E-Book here: 

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LHPH Capital – Come Join Us!

Kevin Londerholm  |  November 24, 2020 

LHPH Capital is inviting you to come join us for our 2020 LHPH Virtual Summit!

Providing capital to our LHPH dealers to help serve the under-served populations in their communities is an incredible experience.  The LHPH Summit is a platform for dealers to share best practices so we can all continue to improve the way we provide value to our customers.  We received excellent feedback from our Summit in 2019 and used that input to generate a concise agenda for this year.  The topics include: Lease Structure, KPI’s, Cash Flow, the Regulatory Environment, and an Economic Outlook.  We are looking forward to seeing you this year!

LHPH: Affordability and Performance

Kevin Londerholm  |  October 27, 2020

Used car leasing offers an answer to the challenge of affordability and performance.  Thanks to the incorporation of the residual value in the lease, a LHPH dealer can offer the same monthly payment on the lease of a vehicle with a $11,000 agreed upon value  as a BHPH dealer can offer on a vehicle with an $8,000 sales price.  Both deals provide the consumer the same monthly payment and down payment, with the same 36-month term.  However, the LHPH dealer can offer a newer vehicle, with lower miles, likely to last the entire term, and result in better portfolio performance over time.

See below as Joe Segrave, Owner of Benchmark Auto Sales, describes how important affordability is for the customers he serves.

Why LHPH in Today’s Market? Pandemic Upends Credit Scorecards and Drives Subprime Auto Lower

Trevor Watson | October 20, 2020


In a recent article published by the Wall Street Journal on October 18, 2020, the Journal identified another unique attribute of this pandemic-driven recession, FICO scores have improved while unemployment has spiked.  “The average FICO credit score stood at 711 in July, up from 708 in April and 706 a year earlier, according to Fair Isaac Corp.”  Obviously, this is a function of the massive financial stimulus and assistance provided by the U.S. government to stem the damage of the COVID pandemic.

However, there are still millions of Americans out of work and much of the stimulus has expired or will soon.  “First the macro stress occurs, and then it takes a few months for the strain to show up in people’s credit reports,” said Ethan Dornhelm, vice president of scores and predictive analytics at FICO, “Deferment programs and government stimulus are having a further effect of pushing out that stress for many people.”  While more assistance may be on the way, it is likely many of the jobs lost will not return and unemployment will remain stubbornly elevated for much longer than anyone had hoped.

Read the entire article here:

As the WSJ notes, “The disconnect has scrambled lenders’ underwriting models and sent them in search of new ways to evaluate applicants’ creditworthiness.”  This impact can also be seen in the Experian State of the Automotive Finance Market Q2 2020 report.  Deep Subprime loans accounted for only 4.35% of all used loans in Q2, a record low in the automotive market and significantly below even Great Recession levels (see chart below).

While lenders continue search for alternative bureau data to supplement their traditional scorecards during this unprecedented time, there remains the likelihood that the worst is yet to come for consumer credit.  “One big fear is that consumers’ credit quality could begin to sour… ‘We’re afraid that in a couple months there could be real damage to credit reports,’ said Francis Creighton, chief executive of the Consumer Data Industry Associations, which represents credit-reporting firms.”

The result of these factors in the auto finance industry will be a prolonged period of reduced subprime lending by traditional banks and finance companies.  Lenders will not jump right back into the subprime market with so much uncertainty over their scoring models, the time necessary to vet and back-test alternative bureau data as supplements, and the likelihood of deteriorating creditworthiness over the foreseeable future.

For dealers, this means a large percentage of the customers that walk on their lot will be unable to secure financing for a new or used vehicle.  These dealers will be forced to walk many of these customers that just a year ago would have been a deal, or if they can get the customer approved, pay much higher discount fees to hang the deal.

One solution to this challenge for well positioned dealers is to rollout their own Lease-Here, Pay-Here platform.  By implementing their own program, dealers can keep these customers, put them over the curb in a reliable vehicle, and enjoy additional profitability from retaining the financing on these customers.  The reduction in competition in the subprime space means LHPH dealers now have access to more customers, and customers of higher quality, who are still unable to get financing from a traditional source.  In addition, there are a number of tax benefits associated with the depreciation accrued from their lease portfolio that can help offset the income of their retail operation.

To learn more about all the benefits of Lease-Here, Pay-Here, check out our blog or download our free e-book here:

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Converting from BHPH to LHPH

Kevin Londerholm  |  October 13, 2020

Thinking about switching from BHPH to LHPH?

Most are familiar with the Buy Here Pay Here (BHPH) business model where a dealership sells a vehicle to a consumer and provides the financing on a traditional retail installment sales contract (RISC) for a specific term and APR.  The dealer then services the installment loan through its life.

LHPH is similar to BHPH, however, the key difference with LHPH is that the financial instrument offered by the dealership is a used car lease rather than an installment loan.

Changing the approach from SELLING vehicles to LEASING vehicles may seem daunting at first, however, there are some key similarities between the two business models that make the conversion simple for the dealership staff & operations.

Watch below as Tim Lawrence, COO touches on many of these similarities.  The conversion from BHPH to LHPH is easier than you think!

Black Book Projects Lower Supply and Higher Valuations on Used Cars for Next Four Years

Trevor Watson | October 1, 2020

This week, Black Book released their projections for used car supply and the impact on used car valuations over the next four years and their forecast looks like more challenges ahead from a consumer affordability perspective.

According to Black Book, “…with the reduction in retail and fleet sales over the next several years, we project a substantial decrease of available used inventory in the years to come.  The graph above illustrates the numbers of returned vehicles up to 8-years-old.  This lower level of used inventory will be beneficial to used car prices as supply will be limited, helping to bolster valuations.”  Read the entire article here:

While this supply constraint will be “beneficial to used car prices,” that translates into higher priced vehicles for consumers resulting in higher monthly payments.  In today’s environment, higher monthly payments, particularly for subprime customers will inevitably translate into higher delinquencies and charge offs for BHPH dealers.  Many BHPH dealers will attempt to mitigate the price increases by extending the term of their retail installment sales contracts (RISC) to keep the monthly payment in an affordable range.  However, extending the average term on your BHPH notes actually injects additional risk and results in higher losses over time.

The solution to the affordability challenge with ever increasing used car prices is to utilize a lease instead of a retail installment sales contract.  Thanks to the residual in the lease, a Lease-Here, Pay-Here dealer can offer a smaller payment on a higher priced vehicle than a BHPH dealer can on a RISC.  In the graphic below, you can see the difference between a lease contract and a BHPH contract on a $12,000 deal.  Both deals are at 36 month terms and the same interest rate, however, the lease payment to the consumer is nearly $100 less per month.

This is another reason why, for dealers who are looking 2-3 years down the road, LHPH is the right model to pursue.

Learn more about the benefits of Lease-Here, Pay-Here by downloading our free e-book here:


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