Used Vehicle Write Down
Depreciation of Used Vehicle Stock
Guideline: Vehicle Specific
Description:If there is one thing that is certain about used vehicles, it is that their value changes on a monthly basis and unfortunately for us, it's usually in a downward direction. The top performing Sales Managers within our industry re-evaluate their used vehicle stock every month, and where depreciation has taken hold, the effects are shown within Used Vehicle Write Down. The value of Used Vehicle Write Down represents the amount of depreciation that has been suffered. Typically, this value can be found within the Semi-Fixed Expenses of your management accounts. The value of Used Vehicle Write Down is usually deducted from the stand in value of the used vehicles that have depreciated so that the screen price can be reduced.
Example:A) Current Used Stock Value = R324,500 B) Revaluation of used stock = R320,700 C) Used Vehicle Write Down = R3,800 (A - B)
Discussion:This process serves to maintain a competitive pricing strategy for used vehicles within your marketplace without the loss of Gross Profit. It provides you with the true trading status of your business as opposed to hiding behind lower margins.
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