301 – Vehicle Lien Payoffs

Current Liabilities

Accounts & Notes Payable

Synopsis

Account 301

Remarks:

A schedule should be maintained for liens on trade-ins and should provide the following information:

• Name of customer from who trade was received
• Vehicle deal control number
• Payoff amount

Liens should be paid off immediately in order to protect the customer’s credit and to ensure that no additional interest is charged.

In verifying the payoff amount, it is important to ascertain that the quoted balance is the net amount due.

Underestimated vehicle lien payoffs should be adjusted to the proper amount with the offsetting entry to Account 222 - Vehicle Accounts Receivable, and an attempt to collect the difference from the customer should be made.

As a goodwill gesture, small or insignificant differences in payoff amount should be written off against the cost of sales for the vehicle purchased.

Over-estimated vehicle lien payoff differences should be promptly refunded to the customer who originally owned the vehicle.

Note: