Industry Article – Understanding Lease-Here, Pay-Here
By: Trevor Watson August 1, 2019
Lease-Here, Pay-Here as a method of financing subprime customers is not a new product, however, the prevalence of the Buy-Here, Pay-Here model in dealerships throughout the country means LHPH is not nearly as well understood as BHPH. This results in a number of misunderstandings about LHPH due to a general lack of easily available information.
For instance, a common concern you will hear dealers raise when talking about LHPH is the risk of vicarious liability and the cost of insurance to mitigate the risk. While that was a challenge for LHPH dealers at one time, in 2005 Congress passed the Graves Amendment that effectively bars vicarious liability claims against lessors, unless it can be proven the lessor was truly negligent. There has yet to be a successful claim against a lessor since the Graves Amendment was enacted.
While the Graves Amendment is a federal law applicable to all of the United States, on a more regional level, many dealers in Texas have long believed the Sales Tax benefits of Buy-Here, Pay-Here were superior to those of Lease-Here, Pay-here in Texas. This is another misunderstanding of LHPH and how Sales Tax actually works on a lease in the state of Texas. Read this article below to learn more about how the process actually works, and how you can make your cars more affordable to your customers while building sales tax credits for your dealership through LHPH in The Lone Star State.