LHPH Software and the Accounting Benefits

By Rachel Jurich - August 12, 2020

The term Lease Here Pay Here (LHPH) is becoming a large trend in the Buy Here Pay Here world. The majority of dealers are noticing the benefits as it gives additional financing options to the buyer as well as being a tax benefit to the dealer. The first step when determining if Lease Here Pay Here is right for you is determining how it would impact your current books. The good news is, Deal Pack can handle it all.

There are 2 ways to account for Lease Here Pay Here deals on the books. The first being Operating Leasing which is where the asset, or vehicle, is being lent to the Lessee and no balance sheet entry is made nor does the Lessee book the depreciation. Operating Leasing companies have a leased inventory as an asset and the receivable is kept off of the Balance Sheet. On the other hand, the second way to account for LHPH is Capital Leasing. With Capital Leasing the receivable is kept on the balance sheet, the Lessee pays for the maintenance of the asset, and the Lessee books the depreciation.

 

Advantages of a Capital Lease:

  • The Lessee has the ability to claim depreciation on the asset.
  • The depreciation and interest expense both reduce taxable income.

 

Advantages of an Operating Lease:

  • There is no transfer in ownership.
  • Lease payments are tax-deductible.

 

Most Dealer Management Software (DMS) companies are not equipped to handle Lease Here Pay Here. However, with Deal Pack it is included at no extra cost and has automatic accounting integrated to work in real time. Interested in how Deal Pack can provide you a smooth transition into the LHPH world? Contact the support team toll free at 1(800) 526-5832 or send us an email at support@abcoa.com for a demo today!

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