Sales Tax Advantage
In LHPH deals, sales tax is only collected on the down payment and monthly payment the dealer receives as opposed to BHPH where the dealer pays all of the sales tax upfront. This concept, called “pay-as-you-go,” is available in 31 states and allows dealers to grow with less capital. Refer to our E-book for a current list of “pay-as-you-go” states. Calculate your positive cash flow impact from leasing with our Sales Tax Calculator!
Collateral Control
With a lease, the dealer’s name is on the title as the lessor (owner) allowing them to have more control over the asset, especially if the vehicle needs to be repossessed. This expedites the process of recovering the vehicle faster.
Bankruptcy Remote
In Lease-Here, Pay-Here financing, leases cannot be included in a bankruptcy, the consumer either has the option to reject their lease and give the car back or assume the lease and continue making their payments. Leasing diminishes the possibility of cram downs or other bankruptcy headaches.
Customer Retention
LHPH transactions develop relationships between dealers and their customers by not only bringing in the customer in for regular maintenance but also providing incentives for customers to trade up their vehicle before their lease contract ends. This advantage creates a strong customer control in a way that benefits both the dealer, by retaining the customer as either way they will need to bring back the vehicle, and the customer, given the opportunity to lease a better vehicle with a new contract.
Residual Income
Once a lease matures, the customer will return the vehicle to the dealership and one of three things will happen. Either the customer returns the vehicle and walks away, returns the vehicle, and would like to lease another car, or will want to buy the car for its residual value. Each circumstance will bring the dealership a stream of cash as the vehicle can either be leased to another customer or be sold.
Flexibility
Leasing programs are extremely adaptable as the auto industry continues to advance through new technology, subscription models, and ride share. The structure of your lease program can be resilient to the ever-changing market we are a part of in a way that BHPH programs simply cannot compete in.