Lease Here, Pay Here Dealerships: A Guide to a Predatory Industry’s Bad Idea

Did you think Buy Here, Pay Here was bad? Powerful folks are pushing Lease Here, Pay Here.

byKevin Williams|
Car Buying News photo
Andrew P. Collins

Buy Here, Pay Here dealerships are predatory, and that’s a fact. Their entire business model centers around selling heinously overpriced used cars with interest rates that are downright immoral to lower-income, bad-credit buyers who lack better choices. It’s a late-capitalist hellscape. And the train doesn’t stop at the Buy Here, Pay Here realm. Nope, society is determined to stomp on the poor for a quick buck: Lease Here, Pay Here dealerships. 

Lease Here, Pay Here, a concept that feels like a satire of how low the used car dealership industry can go, is in fact a real thing, pushed in earnest by players that really want those subprime car-buyer dollars. Recently, the April 2022 BHPH Dealer Magazine has a feature encouraging existing BHPH dealers to branch into Lease Here, Pay Here deals.

The Buy Here, Pay Here industry is a large and vocal facet of car buying, specifically subprime lenders who give money out to folks who don’t have great credit. BHPH Magazine is a periodical made for BHPH pay here dealers. It has contributors ranging from subprime financial analysts to Bill Neylan, the head of one of the largest BHPH chains in the country: TaxMax. It’s a tax filing company that also sells cars, often using the client’s tax return as cash for a down payment. It can do tax refund advances, loaning prospective clients on contingency that it will be repaid with their tax return, as early as the first week of January, well before the IRS even starts processing tax returns. This should give you an idea how cash-strapped these targeted customers are.

From the perspective of a Buy Here, Pay Here dealership owner, Lease Here, Pay Here looks to be a surefire way to earn more money, at least for the dealership. The article says “LHPH is being able to put a customer in a newer, more appealing car for a monthly payment that’s similar to a loan for an older one.” 

BHPH Magazine Screenshot

It's a gravy train for the Buy Here, Pay Here dealer. The dealership spends a little bit more on a slightly less shitty car, the customer pays about the same per month for the car, but at the end of the payment term, the dealership gets the car back. The car can be resold to another customer, the same customer, or wholesaled. It’s a whole new stream of income for the dealership. Their words, not mine.

BHPH Magazine screenshot

For the customer, it's pretty damn awful. Now, they’ve been paying exorbitant monthly fees for a car that they won’t even own at the end of their payment term. At the end of their loan term, they’ll have to buy another vehicle. 

They’ve poured thousands and thousands of dollars down the drain on an older, not very good car, with nothing to show for it. If they do choose to purchase the car at the end of the lease term, the article mentions that the dealership would be in the perfect position to offer financing. A customer could be paying multiple times for a vehicle that wasn’t worth a hell of a lot of money to begin with.

BHPH Magazine screenshot

Most worryingly, this LHPH model appears to be the new frontier in subprime auto sales, brought on at the behest of a lot of market forces that have made buyers vulnerable and desperate. Used car prices are still sky-high, so purchasing a decent car, even from a BHPH lot, is now out of reach for some buyers. In theory, COVID-related job losses and shutdowns should have been a huge blow to the BHPH model, but it wasn’t. Subprime Analytics reports that COVID-related stimulus checks and a revised tax code brought bigger returns and increased business to many BHPH lots. Now, those subsidies are gone, the tax returns aren’t quite as big this time, and some dealers may very well be looking to drum up some business and keep this post-pandemic windfall going. LHPH could be an answer, unfortunately. 

Stay vigilant. This article seems to be the first rumblings of a Lease Here, Pay Here push. The National Independent Automobile Dealers Association (NIADA) recently offered a full-day workshop specifically on the intricacies of Lease Here, Pay Here. An idea that seemed like was limited to a few blog posts, now has big organizations and powerful people legitimizing it. 

Let’s be clear: Lease Here, Pay Here is built to make the dealership more money, first and foremost. If you do find yourself on a Buy Here, Pay here lot, try these tips here to not get suckered. At the very least, don’t sign for a long-term rental on a car that’s been grossly marked up, probably isn’t the best of shape, has a mileage limit, and will have to be returned to the dealership after years of exorbitant payments. It’s just a really bad idea. 

I truly hope the used car market improves soon so folks don’t fall into this terrible trap.