As the automotive industry adapts to shifting economic conditions and tighter credit standards, in-house financing models are gaining momentum, especially among Buy Here Pay Here (BHPH) and Lease Here Pay Here (LHPH) dealerships. These programs allow dealers to serve subprime buyers while maintaining control over financing, collections, and customer experience.

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But what is the difference between BHPH and LHPH, and which model offers better profitability, flexibility, and compliance support?

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At DCS (Dealer Controlled Solutions), we empower dealers with advanced Dealer Management System (DMS) software tailored for both models. Let’s explore how these strategies work—and how you can use them to grow your dealership in 2025 and beyond.

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What Is Buy Here Pay Here (BHPH)?

Buy Here Pay Here, often abbreviated as BHPH, is a financing strategy where the dealership acts as both the lender and seller.

Key Benefits of BHPH:

• Serve subprime buyers who can’t secure traditional financing
• Generate in-house interest income
• Build stronger customer relationships and loyalty

BHPH Compliance: Regulation Z (Reg Z)

Under Regulation Z, part of the Truth in Lending Act (TILA), dealerships must disclose interest rates, APRs, and all credit terms. DCS’s DMS automates Reg Z compliance to reduce legal risk and ensure transparency.

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What Is Lease Here Pay Here (LHPH)?

The LHPH model is a leasing alternative to BHPH. Instead of selling the vehicle outright, the dealer leases it to the customer—which often results in lower monthly payments and access to newer vehicles.

Key Benefits of LHPH:

• Lower monthly payments make it more affordable for customers
• Dealership retains ownership and can reuse or resell the vehicle
• Take advantage of deferred sales tax and depreciation

“An LHPH vehicle usually means a lower monthly payment or a newer car.” – Common search phrase

LHPH Compliance: Regulation M (Reg M)

LHPH leases are governed by Regulation M under the Consumer Leasing Act. Dealers must clearly disclose total lease payments, due-at-signing amounts, and end-of-term options.

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BHPH vs. LHPH: Which Is Right for Your Dealership?

Compare both models to find what fits your customers and business goals:

When deciding between Buy Here Pay Here (BHPH) and Lease Here Pay Here (LHPH) financing models, dealers must weigh the impact on cash flow, compliance, tax structure, and vehicle ownership.

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Ownership Structure

• BHPH: The customer takes ownership of the vehicle at the time of sale.
• LHPH: The dealer retains ownership throughout the lease term.

Tax Implications

• BHPH: Sales tax is due upfront, reducing available cash.
• LHPH: Sales tax is paid over time as payments are received, improving cash flow.

Compliance

• BHPH: Falls under Regulation Z (Truth in Lending Act).
• LHPH: Governed by Regulation M (Consumer Leasing Act).

Payment Terms

• BHPH: Higher monthly payments; no residual value at end of term.
• LHPH: Lower monthly payments; potential for end-of-term residual profit.

Profitability Opportunities

• BHPH: Profit comes from interest and payment collection.
• LHPH: Additional profit potential through retained residual vehicle value.

Customer Fit

• Both models cater to subprime customers.
• LHPH may appeal more to budget-sensitive buyers seeking lower monthly payment.

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Technology That Powers In-House Financing: DCS Dealer Management System

Managing either model successfully requires robust tools. DCS’s all-in-one Dealer Management Software is purpose-built for the unique challenges of BHPH and LHPH dealerships.

Core Features:

• Automated Reg Z & Reg M compliance workflows
• Integrated lease and loan tracking
• Sales tax deferral and depreciation calculators
• Insurance integration (e.g., with Verifacto)
• AI-driven collections management

Risk Management Tips for Subprime Lending

• Use comprehensive credit screening to match customers appropriately
• Require meaningful down payments or trade-ins
• Leverage AI tools to streamline collections and reduce delinquencies

2025 Trends: Why BHPH and LHPH Are Growing

More dealerships are turning to in-house lending models to stay competitive. Here’s what’s driving the shift:

• Rising demand from subprime buyers
• Need for predictable revenue and cash flow
• Digital-first tools like DMS and CMS integrations
• Greater tax control with lease structures

Partner With DCS: Your Ally in LHPH and BHPH Success

Whether you're building a Buy Here Pay Here portfolio or launching a Lease Here Pay Here program, DCS delivers the tools, guidance, and support you need to succeed. From compliance to collections, our technology empowers growth.

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Ready to grow with BHPH or LHPH?

Contact DCS today to see how our Dealer Management System can streamline your operations and maximize profitability.

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