Floor Plan Interest Expense
Recording monthly interest accrued on the vehicle floor plan loan.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Floor Plan Interest Expense | Expense (+) | 18,500.00 | - |
| Accrued Floor Plan Interest / Cash | Liability/Asset (-) | - | 18,500.00 |
💡 Accountant's Note
Floor plan interest is a direct cost of carrying new vehicle inventory. It accrues daily on the outstanding balance for each VIN. In high-rate environments, floor plan interest can significantly erode new vehicle gross profit — particularly for slow-turning inventory. Some manufacturers provide floor plan assistance (interest reimbursement) to dealers as part of their incentive programs.
Practitioner & Systems Framework
💻 ERP Architecture
Floor plan interest is invoiced monthly by the floor plan lender based on the daily outstanding balance per VIN multiplied by the daily interest rate (prime rate plus spread). The interest statement is reconciled to the DMS floor plan records. Manufacturer floor plan assistance (interest credits) reduce the net floor plan interest expense — these are recognized when earned (vehicle retailed with assistance). Floor plan interest is a key metric in dealer operations — high interest costs relative to gross profit (floor plan 'hurdle rate') indicate overinventory or slow inventory turn.
⚠️ Audit Flags
Auditors reconcile floor plan interest expense to the lender's monthly statements. Confirm that manufacturer floor plan assistance credits are correctly offset against interest expense (not recorded as revenue). Test the daily interest calculation for reasonableness — rate × average balance. Review whether any vehicles have been on floor plan beyond the contractual curtailment period without being sold (requires increased provisioning or curtailment demand from the lender).
📄 Required Documentation
Floor plan lender interest statement, daily floor plan balance per VIN, interest rate documentation (prime + spread per agreement), manufacturer floor plan assistance program terms and credit amounts, floor plan interest-to-gross-profit ratio analysis, and aged inventory report showing vehicles with interest cost exceeding gross margin.
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