Vehicle Inventory Floor Plan — New Vehicle Financing
Recording the floor plan loan drawn when a new vehicle is received from the manufacturer.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| New Vehicle Inventory | Asset (+) | 26,200.00 | - |
| Floor Plan Payable (Captive / Bank) | Liability (+) | - | 26,200.00 |
💡 Accountant's Note
Dealers do not own their new vehicle inventory outright — it is financed by floor plan (wholesale) lenders, typically the manufacturer's captive finance company (Ford Motor Credit, Toyota Financial Services, Mercedes-Benz Financial) or a third-party lender. The floor plan loan is drawn automatically when a vehicle is received from the manufacturer. Interest accrues daily on each vehicle until it is sold and the loan is 'curtailed' (paid off).
Practitioner & Systems Framework
💻 ERP Architecture
The floor plan payable is managed in the DMS finance module and reconciled monthly to the floor plan lender's statement. Each vehicle has its own floor plan entry identified by VIN. Interest accrues daily and is typically charged monthly. Some manufacturers offer a free-floor period (e.g., 90 days free of interest) on new vehicle shipments as a sales incentive to dealers — during this period, no interest is charged. When a vehicle is sold, the dealer must curtail (pay off) the floor plan for that VIN within a few days of receiving payment from the finance company. Delayed curtailment creates interest expense and potential 'out of trust' risk (selling vehicles without paying off the floor plan is a serious violation).
⚠️ Audit Flags
Auditors test the floor plan payable balance against the floor plan lender's statement and the DMS inventory. 'Out of trust' verification is critical — every sold vehicle (by VIN) should have a corresponding curtailment. Dealers selling vehicles and not curtailing the floor plan (using the sale proceeds for other purposes) are 'out of trust' — a serious fraud indicator. Test the period-end floor plan balance: vehicles sold near period-end should have curtailments in transit. Confirm interest expense agrees to the floor plan lender's interest charges.
📄 Required Documentation
Floor plan lender monthly statement (by VIN), DMS floor plan payable reconciliation, curtailment records for sold vehicles, out-of-trust assessment (sold VINs with outstanding floor plan balance), free-floor period tracking, floor plan interest expense reconciliation, and franchise agreement floor plan requirements.
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