I had a couple clients request to have payment terms apply to the vehicle purchases. As a result, I have updated the base template to include this new logic. The user can still opt to pay for 100% of the inventory purchase requirements up front, or adjust for payment terms (for example, 1/3 up front, 1/3 in 30 days or 60 days, and 1/3 at sale) or any combination of month and percentage amounts you need based on your situation.
You can get this template here: https://www.smarthelping.com/2017/10/used-car-dealership-financial-model.html
Impacts of this financial model update:
- Results in a potentially smaller initial cash requirement holding all else equal. When you are performing a cash flow analysis / forecast, it is important to understand the timing of when cash is required and when cash is coming in. Having to pay for inventory all up front vs incrementally can dramatically affect the initial investment needed to get the business going. This working capital dynamic is now accounted for in the model.
- There is now an accounts payable balance on the balance sheet that updates as the assumptions are updated and is based on total inventory purchases less inventory payments. As a secondary effect, I also needed to assume if the exit is being included (there is a yes/no toggle for this) then the inventory balance and accounts payable balance will automatically zero out and the net cash flow of that is reflected in the cash flow at exit.
Check out all the financial model templates I've built across the site.
