LHPH vs. BHPH: Which In-House Financing Model Builds More Value for Dealers?

Introduction

Independent Dealers today face tighter credit markets, higher vehicle costs, and more cautious consumers. That’s why many are bringing financing back in-house.

But there’s one key question every Dealer must answer:

Should you run a Buy Here Pay Here (BHPH) or a Lease Here Pay Here (LHPH) model?

Both give you control over the customer relationship and recurring revenue — but the financial structure, tax benefits, and long-term value differ in meaningful ways.

At Dealer Controlled Solutions (DCS), we help Dealers run both models through one flexible DMS platform. Here’s what to know before choosing your path.

1. Understanding the Models

Buy Here Pay Here (BHPH)

• The customer buys the vehicle and makes payments directly to the dealership.
• The dealer acts as the lender and carries the note.
• The vehicle is considered sold, and revenue is recognized up front.

Advantages

• Simpler accounting model.
• Builds portfolio income through interest collection.
• Works well for Dealers with established collections experience.

Challenges

• Full sales tax liability up front.
• Greater exposure to charge-offs and repossessions.
• Harder to rebuild customer credit without a lease structure.

Lease Here Pay Here (LHPH)

• The customer leases the vehicle with the option to buy later.
• The dealer retains ownership until lease completion.
• Revenue is recognized monthly as lease income, not all at once.

Advantages

• Tax deferral: Dealers pay sales tax on lease payments, not the entire vehicle value at delivery.
• Portfolio protection: Easier to recover and re-lease vehicles.
• Credit rebuilding: Helps customers improve their credit profile over time.
• Customer retention: The relationship continues throughout the lease term.

Challenges

• Requires a DMS that can handle lease accounting and compliance.
• Slightly more complex paperwork structure.

2. Profitability and Cash Flow Impact

LHPH changes how and when cash moves through your business:

BHPHLHPHRevenue TimingUp frontMonthly recurringSales TaxPaid in full at salePaid on each lease paymentPortfolio ValueLoan notesLeased assetsVehicle OwnershipTransfers to buyerRetained by dealerCustomer RetentionLimited post-sale contactContinuous relationship

By retaining vehicle ownership and spreading revenue across the lease, LHPH smooths cash flow and builds a longer-term asset base — especially when powered by the right DMS.

3. Compliance and Accounting Simplicity

DCS’s platform automates the complex parts of lease and loan accounting.

It helps dealers:

• Generate accurate lease schedules and payment breakdowns.
• Track taxes and depreciation automatically.
• Integrate with collections and payment tools for a full customer lifecycle view.

Whether you choose BHPH or LHPH, DCS simplifies the compliance side so your team can focus on performance, not paperwork.

4. Dealer Controlled Leasing: Bridging the Gap

For many dealers, the best model is a hybrid — Dealer Controlled Leasing (DCL).

It combines the flexibility of LHPH with the community impact of BHPH, allowing you to:

• Create new recurring revenue streams.
• Help customers rebuild credit responsibly.
• Keep financing decisions in-house and under your control.

DCL, powered by DCS, gives you the tools to manage every lease and loan through one intuitive DMS platform.

Conclusion

Both LHPH and BHPH can drive dealer profitability — the difference lies in cash flow timing, tax advantages, and long-term customer value.

With Dealer Controlled Solutions, you don’t have to choose one over the other.

Our system supports both models seamlessly, giving you the flexibility to grow, serve your community, and maximize profitability — all while keeping control in your hands.

Ready to see how DCS powers both LHPH and BHPH success?

👉 Request a Demo

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