Capital for the LHPH Industry

Creating financial flexibility one dealer at a time

How Does Depreciation Impact Taxable Income and Depreciation Payments?

Eyo Toe | June 8, 2021 

Chad Martin, CPA and Fractional CFO, answers how depreciations impacts taxable income and more. 


What Are the Sales Tax Advantages of Operating in a Pay-A-You-Go State

Eyo Toe | June 3, 2021

Pay-as-you-go sales tax is one of the major value adds of having a leasing program when you are located in a pay-as-you-go state. Typically, when using a Retail Installment Sales Contract (RISC) the dealer pays all of the sales tax up front, before the consumer has made any payments. Oftentimes, most if not all of the down payment will be allocated towards the upfront sales tax causing the dealer to be cash negative at the inception of the deal.

LHPH dealers* are able to pay sales tax with each payment the customer makes, allowing them to keep the entire down payment up front. This will create a positive cash flow up front especially when thinking about the impact of multiples leases per month.

Check out this map to find out if you operate in a pay-as-you-go state.

Why Should You Switch to Operating Lease Accounting?

Eyo Toe | January 18, 2021

LHPH Capital is a firm believer that the leasing model is beneficial for all stakeholders involved. If you are a current BHPH dealer looking to convert to a leasing program, you should expect some changes in what your cash flows will look like from an accounting standpoint. Leasing uses operating lease accounting which allows you to receive the many tax benefits of LHPH depreciation on your portfolio and other federal income tax benefits. Because there is no need for a related finance company, you will save money on administrative fees and reap the benefits of tax deferment.

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

Gearing Up for Tax Return Season

Eyo Toe | December 15, 2020

Person changing gear in a car

2020 is quickly coming to an end and you all know what that means…  Tax Return Season is right around the corner!  It is also possible that tax return season may coincide with additional federal stimulus this year which could help many more subprime customers get into the reliable transportation they need right now.

Is your LHPH program capitalized and ready to handle the influx of new customers heading your way in just a couple months?

Give us a call at (619) 222-9990 extension 1010 and let’s discuss how to maximize your 2021 tax season.

Katz, Sapper & Miller Breakdown the Possible Tax Implications of the Presidential Election

Trevor Watson | October 28, 2020

Checkout this article from Katz, Sapper & Miller (KSM) regarding the potential changes in the tax landscape depending on the results of the upcoming election.  One of the primary benefits dealers who transition to Lease-Here, Pay-Here cite for their conversion to leasing is the tax benefits from the depreciation.  Leasing can have a tremendous impact by offsetting income with the depreciation from your lease portfolio.  This is something that could be of importance for certain dealers in the years ahead.

LHPH: Bonus Depreciation

Eyo Toe & Kevin Londerholm  |  September 22, 2020

In the used car leasing model, the LHPH dealer becomes the lessor with ownership of the assets they lease to the consumer and retain in their portfolio.  This opens new opportunities for the dealership from a tax perspective.  The ability to depreciate the assets in your LHPH portfolio over time and report those losses on your Federal Income Tax in the form of a Net Operating Loss (NOL) is another significant advantage of LHPH.  These NOL’s can allow a LHPH dealer to reduce their annual income tax liability significantly.  While this has always been a compelling reason to migrate to LHPH, the new tax law in 2018 served to compound the benefits of leasing.

Whether you decide to use the bonus depreciation or follow straight-line depreciation standards, either model provides strong advantages over a BHPH portfolio. The 2018 Tax Cut and Jobs Act provided LHPH dealers with the ability to utilize 100% bonus depreciation of used vehicle assets in the first year for leases originated between now and 2023. After that time, the 100% bonus depreciation will decrease by 20% per year. This new law provides another tax savings opportunity for the near future. Alternatively, lessors can follow straight-line depreciation and depreciate the entire value of the asset the first year the vehicle is leased. All up-front profit is deferred, which results in little or no tax liability for the remaining years of the lease

Either way, there are strong tax advantages to a LHPH program for at least the next four years.  It is important to work with your CPA to forecast the impact of bonus and standard depreciation on your current and future tax liability as you assess the right LHPH structure for your business.

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.

Lease Accounting

Kevin Londerholm  |  June 11, 2020

One element that every dealer entering the LHPH business should be aware of is accounting.  Lease accounting is different than what most dealers are accustomed to from their BHPH or retail experience.  However, proper lease accounting will allow the dealer to maximize the tax benefits afforded to them from the used car lease product.

Using a LHPH compatible software (DMS) will help with the proper reporting, however, retaining an accounting firm with consumer leasing expertise is highly advised.  They can assist you with transitioning your current books and advise you on the best way to optimize your standard and bonus depreciation for tax purposes.  One such firm with extensive consumer leasing experience to consider is Katz, Sapper & Miller.  See Mike North explain the classification of a lease in the video from our LHPH Summit below:

Lease Here Pay Here Programs

Kevin Londerholm  |  May 18, 2020

Shifting to or launching a new LHPH program allows dealers to overcome the affordability gap for subprime customers, creates new profit centers, offers a superior competitive advantage, and allows the dealer principal to defer tax liability for years to come, among other benefits.  All thanks to the unique aspects of the lease.

See below as Stan, one of our top LHPH Dealers, describes how he decided that he wanted to be a LHPH Dealer and largely leave retail sales behind.


We believe in challenging the status quo of subprime lending and
value our dealers as partners.
Contact Us Today!
Get access to our FREE! e-book and learn how to launch a
Lease Here Pay Here program at your dealership.
Get my FREE E-Book