Capital for the LHPH Industry

Creating financial flexibility one dealer at a time

Lease vs. Loan 101

Tim Lawrence    October 3, 2019

In this short video clip, our Chief Operating Officer, Tim Lawrence, explains the differences between a lease and a loan at the 2018 NABD Conference.  At the most basic level, this is why a LHPH dealer can offer smaller payments, with shorter terms than a BHPH dealer can on the same vehicle.

To find out more about the advantages of a Lease-Here, Pay-Here program, contact us at (619) 222-9990 ext. 1010 or read our FREE 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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LHPH: Collateral Control Benefits

George Klinke | September 24, 2019

Consumer bankruptcy filings are rising across the country and on pace to reach nearly 800,000 in 2019, according to the American Bankruptcy Institute.  Bankruptcies take a significant toll on Buy-Here, Pay-Here dealers, their portfolios, and their profitability.

The Lease-Here, Pay-Here model offers dealers a higher degree of collateral control using the lease as a bankruptcy remote product.  The lease cannot be included in the BK.  There is no redemption for a Chapter 7, or cramdown for a Chapter 13.  The customer has two options, accept the lease and continue making payments, or reject the lease and return the vehicle to the lessor.

To learn more about the collateral control benefits of LHPH, click here to download our E-Book.

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LHPH Dealership Interview – Markosian Auto

Tim Lawrence | September 3, 2019

“My experience with LHPH Capital has been nothing but 100% positive!” – Nick Markosian

Read more of the informational interview below to find out why this LHPH dealer principal is so pleased they made the switch from a BHPH program.

What was the original catalyst for your transition from BHPH to LHPH? “There were of course the attractive advantages of fewer regulations, easier repos and depreciation, but the actual catalyst was almost going broke during the 2008 recession and needing the cash flow of $600 more per unit from the decreased sales tax.”
Now that your LHPH portfolio is mature, are there any advantages that caught you by surprise? “The recycling of inventory that came back to us every month in a profitable way was a huge surprise.  There were more expired leases and trade-ins than repos so having 50-60% of our inventory as assets already paid for out generating cash flow again made a huge difference.  I think another surprise was the simplicity of the accounting, especially because we didn’t need a RFC.  The only money on your P&L is the lease payment income; whereas with BHPH it’s all smoke and mirrors.”
What is the typical customers response when they hear leasing instead of buying? “First, I’ll say we’ve never had a customer say they won’t do business with us because we offer leasing.  The two biggest concerns are that they won’t own the car in the end or that it might be an exotic scheme to take advantage of them.  We take that as an opportunity to educate them on the differences and benefits to them and then compare the buying cost to the leasing cost.  In the end, they care most about having a lower payment and knowing they have a way out by turning in the car if they have trouble making a payment.”
What were your greatest obstacles during the transition? “Figuring out how to do leasing with our BHPH DMS was by far the biggest challenge.  We just kind of shot from the hip mainly and didn’t realize how important it was to get the right CPA and DMS in place.”
What has been your overall experience working with LHPH? “Nothing but 100% positive.  Terry is incredibly knowledgeable about our business and has trust and faith in us.  I consider Terry a friend and not just someone who lends me money.  You guys are awesome.”

To find out more about the LHPH model and the benefits your dealership can enjoy, please refer to our E-Book, Lease Here Pay Here, Why Do It & How To Launch It

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LHPH Frequently Asked Questions

Trevor Watson | August 26, 2019

Do you have a Buy-Here, Pay-Here program and are looking to learn more about Lease-Here, Pay-Here?  LHPH has been gaining popularity over the last 10 years as dealerships discover the benefits it can provide. 

Below are a few of the most frequently asked questions when beginning to explore the LHPH model.

What is a LHPH program? – A form of lending designed to assist consumers find reliable transportation who may otherwise not qualify with traditional bank and finance company lenders.
– Similar to BHPH, however, using the lease as the financial instrument instead of an installment loan to gain many unique advantages
– LHPH dealers maintain ownership and often lease the same vehicle several times over the life of the unit resulting in greater profitability
What major benefits are associated with an LHPH program? – Improves cash flow with “pay-as-you-go” sales tax
– Allows the dealer principal to defer tax liability 
– Closes the affordability gap for subprime customers
– Creates new profit opportunities
– Differentiates the dealership and creates a competitive advantage
– Better protection from consumer bankruptcy claims
What are some key differences in the LHPH model?  – The lease instead of the loan
– No need for a Related Finance Company
– Not all DMS systems have a LHPH module
– In order to enjoy the tax advantages, your accounting will look a little different

To read more about the various benefits a LHPH program offers, and learn how to launch your own platform, download our FREE E-Book below.

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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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2018 NABD Conference – Is LHPH a Better Alternative?

Kevin Londerholm    February 4, 2019

Is LHPH a Better Alternative for your dealership? We certainly think so and so do our dealers.

Watch as our Chief Operating Officer, Tim Lawrence, presents on a few different lease-here pay-here models at the 2018 NIADA Conference in Las Vegas.

Lease-here pay-here can bring many benefits to your dealership and has a similar BHPH sales process, however, it requires a slightly different mindset.

See as Tim presents the steps to obtaining your own LHPH Program, differences with BHPH, and main benefits for the customer, dealer, & lender when leasing is offered.

Link to Tim’s Presentation: https://www.youtube.com/watch?v=YpL3GY4frio&t=2s

Fill out your information on our Contact Us page if you are ready to offer a used car leasing program at your dealership!


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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