Lease-Here Pay-Here and Rent-to-Own have become increasingly popular over the past five years to dealer controlled financing and leasing companies. Certainly there are some advantages, especially when it comes to paying sales tax, but no all that glitters is gold.
Without turning this into a bashing session, I would love to hear why dealers have chosen one over the other, and what pitfalls they have run into with whatever method they have chosen.
We have been thinking about getting into buy here pay here or rent to own. We don't have enough information to really make a good decision. Where can we get some straight info on each to make a good decision?
I have been in BHPH for 14 years and I haven't seen a LHPH or Rent to Own operate for very long. I know that bad management could be the reason. I cannot say alot about either. You should check out the tax advantages of LHPH in your state. What LHPH says is a huge cash flow advantage is basically some tax savings you could see. As a lessor you are the owner of the vehicle. I have had thousands of customers in the BHPH business and I wouldn't of wanted very many of them driving in a vehicle with my name as owner. Calling it leasing and not financing is about the difference. The customers, collections and risks are the same. If the tax savings are signifigant in your state, then you could realize some improved cash flow. I know that selling the lease program would be totally different and some customers would have trouble comprehinding the buy out, excess mileage and wear and tear. I can help with BHPH if you would like more info. 479-967-3192 Gene
Ryan-My name is Jerry Weeden and I am an agent with Prime Eagle.This is a lease here pay there program that is a true lease.Reg m compliant.Very simple and we have the forms set up and ready to use.Please give me a call at 810-938-7740.I live in Fenton,Mi and have talked with several dealers up north.Would really like to hear from you.
I feel the best advantages are the ownership remains in your companys name as well as the income is taxed as it comes in. If the vehicle need to be "repo-ed" then the time frame may be shorter to clear the title. obviously you want the vehicle to be out and earning income however there will be issues especially in this economy. The benchmark of all the BHPH seminars I have attended indicate 7 out of 10 will come to fruition. The first 90 days should be a good indication of how your contract will perform. I strongly suggest to sign up on an automatic withdrawal from thier financial institution. Look at the total income, lifestyle and "picture of your prospective client. If you do not feel comfortable up front then dont even bother. Common sence should prevail on your decision. Sheldon Wolff Blossom Rental & Leasing inc
I have been in the business for fifteen years. My rent to own business started up just about a year ago. For me,It is much easier to deal with problem customers. Please believe me when I say that the company that Mitch Berndt is associated with has made my life much easier. His staff can answer any questions you have from legal aspects to insurance needs. He has no idea I am writing this. Do yourself a favor and give him a call. The added insurance helps me sleep at night so I can enjoy the benefits of having the title in the company's name.
1. Deferred Federal and State Income Tax Liability
2. Acceleration of accounting income. Improves financial statement which could support expansion of the dealer's credit lines.
3. Collection of Tax-Free Security Deposits... not a down payment
4.Avoidance of a Related Finance Company and all that goes with that
5. Reduced federal regulatory Requirements
6. Reduced State Regulatory Requirements
7. Reduced Consumer Disclosures
8. Greater Flexibility in Product Design and Marketing, easier to substitute collateral, more "trade in" flexibility
9. Bankruptcy Protection, Title is in company name
10. Reduced Monthly Payment
11. Elimination of Initial Sales Tax in most states
12. No loss of pre-paid sales tax at Default in most states
Potential cons include:
1. The potential for vicarious liability in some states, although this is not as much of a concern these days since the "Graves Amendment" was passed.
2. Additional operational complexity for employees who have lived in a BHPH world.
Mitch, I would love some more info. I can try to contact you later. I am interested in the possiblity of easing into it. Keeping a lot of my bhph and try some lhph to see how it all works. I don't know if thats possible or if it would be too much paperwork. It is something we have thought of for a long time especially when you have a problem customer. Like the lady yesterday who I repoed after not making her first two payments and now she threatened to go in bankruptcy and get her car back. UGH.... I would bet she couldn't do that in a LHPH situation. I dont' know if she can do it in this situation either. I would like to know about your program. Costs involved. Responsibilities on our end for repairs. Credit reporting, Insurance requirements, etc. Thanks. Tina Faucette 407-464-1744 office, 321-279-1212 cell.
Dave you have some great info.
Gene, you know we are in buy here pay here too and may think along the same lines, but what do you think about the bankruptcy advantages, do you think that some customers who have had several repos would fit into a LHPH situation better than BHPH? Is there the same money to be made?
Tina, LHPH and BHPH are alot the same. They are both ways to finance bad credit loans. The money would be the same. The customers should be the same. The repairs would be the same. Bankruptsy might be different, but not much if at all. If your repo was taken before the customer spoke with an attorney, she shouldn't get the car back. We do not sell cars to customers with a recent repo let alone multiple repos. The LHPH is a different sell, different software, contracts ect. Obviously it works for alot of people.