Capital for the LHPH Industry

Creating financial flexibility one dealer at a time

Lease-Here Pay-Here: Mike North, CPA

Kevin Londerholm  |  April 21, 2020

Mike North, CPA & Partner at the accounting firm Katz, Sapper & Milller, serves in the firm’s TransactionBuy Here – Pay Here and Dealership Services Groups and also has considerable experience in the equipment leasing industry.  Mike has extensive experience advising clients in accounting, financial reporting, auditing, compliance, and internal control matters.

Listen as Mike presents one of the main reasons why an independent auto dealer chooses to transition from Buy-Here Pay-Here to Lease-Here Pay-Here: Sales Tax Advantage.

  • BHPH: On a retail installment sales contract, the sales tax is paid at the time of the transaction on the sales price of the vehicle. This means the dealer will use the entire down payment for sales tax and is immediately cash-negative at the inception of the deal.
  • LHPH: In “pay-as-you-go” states, the sales tax is calculated on the actual monies collected by the dealer (i.e. down payment, first payment). The dealer can pay sales tax over time, rather than all up-front.  The dealer can start each loan on a cash-positive basis.



LHPH – I Have a CFO and So Can You

Kevin Londerholm  |  March 18, 2020

At our LHPH Summit hosted late last year, LHPH Capital’s owner and founder, Terry Bowdler, sat on a panel discussing the importance of having a Chief Financial Officer (CFO) at your dealership.  Although many independent auto dealers may not have the volume to warrant a full-time CFO, a fractional CFO is the perfect place to begin getting more strategic with your operations.  A CFO will be able to help you generate accurate financial statements and give you greater insight into your dealership cash flow. As the economy heads into some potentially turbulent times, the help of a fractional CFO could help steer your dealership towards a bright future.  Watch the video below & reach out to us if you are interested in seeking the help of a fractional CFO.


Driving LHPH Into the Future

Kevin Londerholm  |  January 2, 2020 

LHPH Capital hosted its annual LHPH Summit in San Diego at the Hard Rock Hotel on November 8 – 9th, 2019.  Watch as Tim Lawrence, Chief Operating Officer, introduced the purpose of the Summit: to create a platform for LHPH dealers to share best practices and become better operators.  LHPH industry experts were given the opportunity to share their knowledge & lessons learned as they navigated their journey to becoming some of the most successful LHPH Dealers in the nation.  Stay tuned in 2020 as we release highlights from the LHPH Summit which covered topics from importance of accounting, access to capital, sourcing inventory, cash flow, the subscription model, underwriting software, and much more!


Operating Lease Accounting Handbook for Lease-Here, Pay-Here

Trevor Watson | December 16, 2019

Many Lease-Here, Pay-Here dealerships started as Buy-Here, Pay-Here dealers, building a portfolio of retail installment sales contracts (RISC) that appear on their balance sheet as a large asset of receivables.  The accounting method for recognizing the individual loans and the monthly payments is very common and familiar to most dealer principals and their Controllers.

At some point, the dealer principal discovers the laundry list of benefits to Lease-Here, Pay-Here, and decides to make the transition.  There are a few small hurdles in the process; a migration to a LHPH compatible DMS, a new lease contract instead of the old RISC, some basic training for his or her staff to understand the Language of Leasing, and they are off and running.  (You can find all of this information in our free E-Book here.)

After the transition, there is one piece where we get a few questions from the dealers, simply because it is a little different than what the Dealer and their Controller are accustomed to:  Operating Lease Accounting.  Unlike the BHPH method of accounting where the loan goes on the books as a large receivable, with Operating Lease Accounting, the lease is recognized on their books as the ACV of the underlying vehicle and the payments are then recognized as revenue on a monthly basis.

The benefits of this method allow for the dealerships to enjoy the favorable tax treatment of the lease by booking depreciation and using the depreciation to offset their annual income.  For many dealers, this means a large percentage (or the entirety) of their annual tax liability will be deferred for years to come.

We recently developed an Operating Lease Accounting Handbook to help our dealers remain compliant with the GAAP rules surrounding Operating Lease Accounting and enjoy this substantial benefit of LHPH.  As always, you should consult with your own tax professional to ensure you conform to all local, state, and federal regulations.

If you would like to read our new handbook, give us a call at (619) 222-9990 x 1010 or email us at to learn more.

LHPH Insights from Katz, Sapper & Miller

Trevor Watson | December 9, 2019

Here is a link to a recent article on the benefits of the Lease-Here, Pay-Here model from a top 100 accounting firm.  Take a couple minutes to read this blog post from Katz, Sapper & Miller.  This firm works with BHPH and LHPH dealers across the country, which gives them a unique and valuable perspective on the industry.

Bonus Depreciation

Trevor Watson | October 21, 2019

Depreciation and the dealer’s ability to defer Federal Tax liability is one of top three advantages Lease-Here, Pay-Here dealers cite as the initial reason they considered the product.  In 2018, the Tax Cut and Jobs Act included a section called, “Bonus Depreciation.”  Watch the clip below to learn how Bonus Depreciation has made LHPH even more advantageous to dealers.

Learn more about all the benefits of Lease-Here, Pay-Here by downloading our LHPH E-Book.

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Are You Cash Negative at the Inception of a BHPH Deal Due to Sales Tax?

Kevin Londerholm | September 9, 2019

A major advantage of a Lease-Here, Pay-Here program is the sales tax advantage that allows dealers to be cash positive at the inception of a deal. For lease-here pay-here dealers 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 be cash-positive from the moment they roll the vehicle.

Note: If your state is not listed here, this does not necessarily indicate LHPH will not work for you. Sales Tax is one of many benefits LHPH offers.

Contact us at (619) 222-9990 ext. 1010 to discuss how you can build an LHPH program or learn more from our Ebook!

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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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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.

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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