Capital for the LHPH Industry

Creating financial flexibility one dealer at a time

LHPH vs BHPH with George Klinke

Kevin Londerholm  |  September 30, 2020

What is the difference between Lease-Here Pay-Here and Buy-Here Pay-Here?

Watch below as George Klinke, our EVP Business Development, clearly explains the different models for independent auto dealers to either SELL or LEASE their vehicles.

BHPH = Retail Installment Sales Contract, ownership of the vehicle is passed to the consumer

LHPH = Lease Agreement, the Dealer retains ownership of the vehicle while the customer makes a certain number of payments to use the vehicle

As George explains, the LHPH customer is given the option to either buy the vehicle at the end of their lease OR turn the vehicle back into the dealer and lease a different vehicle.  This flexibility in the LHPH Product is one of the many benefits both the dealer and the customer will get to experience with the Lease-Here Pay-Here model.

Contact us today if you would like to learn more about the LHPH Model! or 619-222-9990

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.

LHPH and BHPH Take Market Share in Subprime Market

Trevor Watson | September 8, 2020

Is your LHPH program prepared to capitalize on today’s market conditions?

According to Experian’s State of the Auto Finance Market for Q2, 2020, subprime loan originations fell to record lows as lenders mitigate risk in their portfolios by tightening credit standards in higher risk buckets. This leaves many consumers without traditional financing sources.

It also opens an opportunity for LHPH dealers to drift up the credit spectrum to capture more customers with higher quality than they have over the last decade. You can see the trend is just starting with BHPH gaining 90bps in market share over Q2 2019.

Contact us today to learn more about Lease-Here, Pay-Here and the LHPH Capital funding program.

Collections: Lessons from the Last Six Months

Trevor Watson | August 4, 2020

Collections and portfolio servicing have been a rollercoaster ride since the onset of the COVID-19 pandemic in March of this year.  The initial lockdowns, furloughs and layoffs resulted in widespread implementation of deferment programs and moratoriums on repossessions.  The emergency stimulus from the government threw lifelines to millions of consumers and staved off the expected surge in delinquency and defaults.  Only to be followed by additional pullbacks after an unsuccessful attempt at reopening.  Now the moratoriums are expiring, the enhanced unemployment has lapsed and is likely to come back in a reduced capacity, while the economy struggles to find its footing in a patchwork of federal, state and local responses.

Amidst all of this, LHPH dealers are trying to manage their portfolios in a responsible fashion while understanding and working through the challenges their customers have been faced with.  Bill Elizondo, COO at AFS Dealers, has compiled a list of best practices for LHPH and BHPH collections learned through the first six months of navigating these challenges.

You can find his recommendations in the most recent NVLA LeaseWire:

Agility, Technology, and Resilience in LHPH

Trevor Watson | July 22, 2020

A recent article on Auto Finance News, “Surviving Economic hairpin turns”, written by Shaimaa Elk, provides a succinct roadmap for subprime lenders navigating the unique circumstances brought on by the pandemic.

Lease-Here, Pay-Here dealerships are actually small community-based subprime lenders, not just car dealers.  They provide and service portfolios of affordable leases on reliable transportation to consumers who cannot qualify for traditional bank financing.  As such, LHPH dealers can find value in Shaimaa’s recommendations for subprime lenders.

While some of these recommendations may appear geared for larger financial institutions, many of these apply directly to LHPH dealer-lenders or can be modified slightly to be applicable.  One example is integrating better payment technology to make the transaction as simple and easy as possible for your lessees who may not maintain a traditional checking account.

Other ideas could include joining ComplyNet through NIADA to ensure regulatory compliance with all the changes we are likely to encounter at the local, state and federal levels throughout this recovery.  In addition, preparing your collectors for remote work is a wise precaution to address now to keep your payments coming in, in the event you need to vacate the dealership for a period.

The list of ideas to build agility and resilience in your LHPH operation is long, but the general concepts laid out by Shaimaa are a good guide to get you thinking down the right path.

Lease-Here, Pay-Here – Bankruptcy Remote

Trevor Watson | July 9, 2020

As the pandemic continues to impact people and the economy across the United States, it is reasonable to expect an uptick in consumer bankruptcy filings in the near future.  According to an article published by CNBC on July 8, 2020, 32% of households missed their housing payment for the month of July.  Unemployment claims continue to climb and the extra $600 unemployment payouts are set to expire at the end of the month.  Even if these are extended, they will not last forever and the continued increase in cases and rollbacks of re-openings likely indicates further distress in the future for the subprime consumer base BHPH and LHPH dealers service.

One of the many benefits of the product offered by Lease-Here, Pay-Here dealers is the bankruptcy remote nature of the lease.  Unlike the retail installment sales contract in Buy-Here, Pay-Here, a lease cannot be included in a BK.  The lessee must decide to either “accept” the lease and continue making the agreed upon payments, or “reject” the lease and return the vehicle to the lessor (the dealership).  There are no cramdowns available for Chapter 13’s or other headaches for the creditor typically associated with the bankruptcy process.

In today’s environment, migrating from the traditional BHPH model to the LHPH model continues to make even more sense.

Learn more about all the benefits of the LHPH model by downloading our FREE E-Book below.

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New and Used Inventory Crunch – How LHPH Helps

Trevor Watson | June 23, 2020

Every dealer is feeling the impact of the very unique market conditions brought on by the pandemic.  The statewide closures, injection of stimulus funds, moratoriums on repossessions and lease return extensions, combined with pent-up demand have thrown the used car market into whiplash.

Here is an excellent article that dives into the details of the current used (and new) car supply squeeze:

How LHPH Helps Dealers During Supply Challenges

This unforeseen situation has shined a light on an additional benefit of having your own Lease-Here, Pay-Here program:  Recycling of Inventory.  We often promote recycling of maturing leases from your portfolio as a significant advantage of LHPH from a profitability perspective, and it is.  However, the additional benefit of having a mature portfolio of leases with numerous lease returns coming back to each month is:  free inventory.

For dealers who have developed their LHPH program over the last few years, they have 10, 20, 30 cars coming back onto their lots each month, without having to buy those vehicles in the market.  These cars are debt-free, no flooring or lines of credit debt and fees weighing their operations down.  These dealers are not paying $2,000 over book to win the vehicle from their competitors on the block.  Many are still buying additional vehicles for the inventory right now, but they can be selective, thanks to their guaranteed flow of lease returns each month.

Of course, growing and maintaining a lease portfolio to the maturity point takes time, discipline and dedication.  Dealers who may read this and think, “that doesn’t do me any good at this moment,” should remember, we have now seen two significant supply crunches in the last 12 years alone.  With little doubt, there will be more of these events at some point in the future.  Preparing now and building your lease portfolio will allow you to ride out the natural fluctuations of the future used car market, whether those are large or small.

Lease Here Pay Here Success

Kevin Londerholm  |  June 18, 2020

The first question every dealer researching LHPH asks is, “can I make more money with LHPH?”  The answer to that question is yes.  There are numerous new profit opportunities that come with the implementation of a LHPH program.

With a Lease-Here Pay-Here deal, the dealer leases the vehicle to the first consumer and then services that lease through its term.  The LHPH dealer makes the same profit as a BHPH dealer from the original mark up on the car and earns a rent factor on each payment equivalent to a similar interest rate on the BHPH note.

However, when the lease matures, the dealer still retains the vehicle (the asset) and can re-lease the same vehicle again, or sell it, without purchasing new inventory.  When the vehicle is leased again, the dealer makes a profit on the markup a second time, as well as the rent factor on each payment (interest) from the new lease, creating a second stream of payments generated from the same asset.

Listen below to the high level of profitability that an Independent Auto Dealer can achieve through operating a LHPH Program:

Top 10 Benefits of Lease-Here, Pay-Here

Trevor Watson | June 17, 2020

Why would a dealer choose a Lease-Here, Pay-Here program over the traditional Buy-Here, Pay-Here model? Here are the top 10 benefits of LHPH.

To learn more about each of these, download our free LHPH E-Book here:

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LHPH: Dealer Employee Buy-In

Kevin Londerholm  |  May 26, 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, down payment, and 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.

Watch as Nick, our experienced LHPH Dealer, explains that after educating his staff on the benefits of the LHPH program for their customers, his employees truly bought into the in-house lease product.

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