How do I deal with finance settlement on a unit?
Summary
This article explains how to deal with Finance Settlement on a part exchange vehicle, both where the finance for the new vehicle is taken out with the same company and when the companies are different.
More Information
When a vehicle is taken as part exchange towards a new vehicle, has a finance balance outstanding on it and you agree to settle this balance, you will need to pay the relevant finance company.
 | In most instances, where the same finance company is providing the new finance as well as the settlement, they will generally "contra" the settlement amount against the new amount financed and only pay you the nett balance of the transaction, i.e. the total new amount financed (generally the invoice balance) less the settlement on the part exchange. This is not always the case, but is very common now. |
Same Company Hire Purchase Settlement
If the new finance is with the same company as the outstanding finance on the part exchange vehicle, once you have completed and invoiced the deal, go to " Sales Ledger Receipts".
Posting the Payment for the Vehicle Sold
- At "Customer:", type in the customer's account code if known, or search for a customer.
- You can search for a particular document by entering the number or press <Enter> to display all documents.
- Press the <Down Arrow> arrow until '<=' is pointing at the invoice you are receiving payment for.
- Press <P> to make a partial payment where the finance company has paid the nett value.
- Press <F> for full payment if they have actually paid the invoice balance. You will have to send them a cheque for the settlement if this is the case.
- Enter the 'Amount' that has been paid.
- Press <Esc>.
- Enter the 'date' the payment was received, and press <Enter>.
- On the "Comment :", type in the cheque number and also the sale vehicle stock number that the payment is for, i.e. not the Part exchange number.
- Enter 'Z901' to show that the payment was by cheque, or 'Z992' if it was by BACS.
- Press <Esc> and click [Accept] to complete the payment.
| You will notice now that the 'Balance Held' on the invoice has now dropped by the amount you have entered, leaving the finance settlement amount that was on the Part Exchange. |
Posting the Payment for HP Settlement on the Part Exchange
To pay off the HP settlement on the part exchange, stay in " Sales Ledger Receipts" with the same account code, and find the same invoice again, which will now have just the finance settlement balance left outstanding.
- Press <F> to pay off the remaining amount of the invoice, which will move the balance over to "Payment".
- Press <Esc>.
- Enter the 'date' that the payment is made and press <Enter>.
- On the "Comment :", type 'HPSett' and also the vehicle stock number for the part exchange.
- Enter '19850' or your centre for 'Finance Settlement Control'.
- Press <Esc> and click [Accept] to complete the payment.
| This has now cleared the invoice balance completely by posting the money that you actually received and the settlement that you agreed to make. |
Different Company Hire Purchase Settlement
If the new finance is with a different company to the outstanding finance on the part exchange vehicle, once you have completed and invoiced the deal, go to " Sales Ledger Receipts" again.
Follow the instructions as above for posting the money received from the finance company for the new vehicle, remembering that they should be paying the invoice balance in full.
You still need to deal with the finance settlement since you owe this to the "old" finance company, and you have agreed to settle this with the customer. The system has posted the amount you owe to your finance settlement control account ('19850' in the standard Platinum set-up), and you will need to clear this liability when you pay the finance company.
To clear Finance Settlement Liability
- Go to " Nominal Ledger Journal Entries Cashbook Entry".
- Enter your bank account nominal code.
- Type 'O' for Out.
- Enter the date that you are making the payment.
- Enter the finance settlement control account.
- Enter the finance settlement amount.
- Enter 'HPSett' and also the vehicle stock number for the part exchange.
- Press <Esc> and accept the journal.
Further Information
Finance settlements are quoted when a deal is being proposed and can change if the deal takes time to come to fruition. You should ensure that the settlement figure entered is as up to date as possible otherwise you may end up having to post adjustments for any differences and potentially refunding the customer any difference.
See also
- Posting Payments Received
- How do I Find a Customer?
- How do I Handle Contras?
- How do I Create a New Finance Company?
VS84,VS88,VS01
