I have been reading up on this for the past month. I know northland has a program for $800 bucks to start up. Looking for some information on minnesota laws. Such as do we have to keep insurance on all the cars or can we leave that up to the customers just like in BHPH? Is it as simple as putting the car in the dealers name setting up a contract with the customer and sending them on their way? What really got me interested in this was all the wasted money i send to the state every month. Nothing like paying transfer and tax on a car just to get it back a month later to do it all over again. I would like to keep the car in the business name until someone actually pays it off. any info would be greatly appreciated.
Here is a paragraph from a Special Finance article in Oct. 2008, by attorney Randall McCathren titled, "LHPH Opportunities".
LHPH vs. RTO Definitions
You’ve seen the terms “BHPH,” “LHPH” and “RTO” before but rarely are the terms accompanied by clear definitions. And the products offered under each label sometimes blur the legal differences.
LHPH programs start with a “true lease” under the federal IRS definition (tax purpose) and Federal Reserve Board definition (regulatory purpose). While there are a number of technical requirements and some “gray areas,” in general a “true lease” has two main characteristics:
If a transaction (denoted as a lease) violates the first requirement, it could be treated as a conditional sale (Regulation Z and the state motor vehicle retail installment sale act then apply). If it doesn’t have at least a four month term, it is a rental not a lease and then subject to any state requirements for rental transactions.
A “true rental” in an RTO program has no minimum term, i.e., the lessee can terminate after any payment period without further obligation. Thus, if an RTO transaction has a minimum term of 4 months or longer, it is no longer a “rental” and becomes either a “lease” for federal regulatory purposes (Regulation M applies) or worse, a conditional sale (Regulation Z applies).
Why are LHPH Programs Preferable?
There are a number of tax, accounting and regulatory differences between conditional sales and leasing that make LHPH programs more attractive and potentially much more profitable than BHPH programs. Compared to RTO programs, LHPH programs are much safer from a compliance standpoint since there are “safe harbor” federal requirements that are relatively easy to follow. RTO programs have no federal safe harbor so the states have created a messy array of rules. Worse, state attorneys general often view RTO programs as “predatory” and create retroactive restrictions and penalties in response to consumer complaints.
 Meeting both the federal tax and regulatory purposes will also generally keep the transaction safely outside state definitions of “conditional sales” found in the state motor vehicle retail installment sale acts.
My recommendation is to stay out of the "gray areas" and programs that state attorneys general would view as "predatory". Make sure you find the right expert like Mr. McCathren before the AG's office comes knocking on your door. Retroactive penalties can put you out of business very quickly.
Mr. Arceri is close to correct. Northland uses a Federal Regulation "M" lease with a residual at the end. It allows the car to be returned at any time without penalty. It stays out of the "gray areas" and has numerous safety devices to protect the dealer from litigation and State regulators. Northland has not lost a contract challenge, which they defend at their own expense, in the 21 years that they have been doing RTO.