|Accounting for the different types of car deals generated from your F&I programs is important if you want to completely understand your business operations and the resulting effective gross profits.|
|There are retail finance, retail cash, wholesale and BHPH deals to consider when setting up your F&I program so your accounting transactions are recorded accurately to furnish you the best possible information to analyze your business.
Retail finance can also be broken down into different types, retail prime and sub prime car deals which should be recorded differently in your general Retail ledger.
If the transaction were a retail sub prime car deal, the following additional lines would be added to the ledger entry:
If you wanted to specifically isolate your retail deals from your sub prime deals, you would also use sale, cost of sales, reconditioning and commission accounts with “sub prime” replacing the word “retail” in the account name.
Retail Cash Deal
The following illustrates the ledger transaction for a wholesale transaction.
A customer agrees to a BHPH transaction involving the same vehicle with $1,000 down and an extended service contract and finances the balance with the dealership. The ledger transaction would look similar to the following:
These entries are only examples of potential transactions that may result from the different types of car sales in your dealership. They are not meant to be all inclusive as some states may require the collection and remittance of sales tax, license and title fees, etc. Some dealerships charge a DOC fee, which is also added to the total cash and receivables due.
A dealership that utilizes consistent and accurate accounting entries for sale transactions has taken the first step to understanding their business. It helps to separate sales, cost of sales and various expenses by the type of sale, as shown above. It may also help to separate the various types of sales into different departments with associated expenses allocated to each. This will allow you to analyze your strengths and weaknesses in the various sale types just by printing a departmental profit statement.
I hope these examples have helped you better understand the accounting side of your sales. Compare these sample entries to your actual accounting software entries and investigate the differences. It helps to record all entries in one transaction instead of pieces.
If you have any further questions regarding how your sales should be recorded, contact your accountant or CPA, and they should be able to assist you.
Vol 5, Issue 8
Ford Motor Co. and Volkswagen Group announced the first formal steps toward a partnership that will produce new commercial vehicles and pursue shared innovations in mobile services, autonomy, and electrification.