Leased Vehicle Net Income—Wholesale

• ACCOUNT EXPLANATION
• TRANSACTIONS
• COMMENTS

Income and expense related to wholesale leased vehicles in service when the leasing activity is part of the dealership operation.

Note that a wholesale lease is defined as one in which the dealer retains title to the vehicle; the dealer establishes a separate line of credit (similar to floor plan) to finance the vehicle; and the dealer is responsible for risks, credits, collections, and lease-end risks.

• This is a control account. Information as to the detailed supporting income and expense accounts to be maintained is contained in Vehicle Leasing and Rental.
• Vehicles placed in leasing service within the dealership operation should be recorded as inventory transfers at inventory value, excluding holdback and predelivery and conditioning allowance, not as vehicle sales. New vehicles sold to a separate leasing organization, independent or owned, should be recorded as fleet sales. Units retired from leasing service should be transferred to the used car department for disposal. Such transfers should be made at estimated wholesale value (less estimated reconditioning charges) with any difference from net book value being recorded in this account. Subsequent sales of these units should be recorded as used car sales.
• Accurate revenue and expense records should be maintained on each leased vehicle so that existing contracts can be evaluated in developing future lease proposals.
• Tax counsel should be obtained regarding the handling of leased vehicle income and expense for income tax purposes.