How Did the IPIC Method Fare for Auto Dealerships Inventory in Year 2?

The SD Auto Advisors were all over the Inventory Price Index Computation (“IPIC”) method of accounting for our automotive dealerships’ inventory for the 2021 税 filing year. We saw some serious 税 savings by capitalizing on inflation and combining more inventory items into our LIFO pool.

如果你还记得，我们在2021年经历了以下事情:

• LIFO pools – we combined new, used and parts inventory in one LIFO pool.
• New vehicle inventory – Dealers had a drastic drop in total inventory and had inflation of 12%
• Parts – Dealers had a drop in inventory and had inflation of 11%
• Used vehicle inventory – Dealers had an increase in total inventory and had inflation of 37%

Our goals were to diversify dealership inventory by combining inventory pools and to capitalize on inflation. This is a strategy similar to diversifying your investment portfolio. This change in accounting worked out to be very beneficial for dealers and saved some millions of dollars in 税es.

Our one hesitation in 2021 was concern about volatile used vehicle prices. 对于二手车，第二年会发生什么? 好吧, 我们考虑了简单的经济学, assuming that when new vehicles come back to normal levels, 二手车价格将下降. 在这种情况下, our weighted calculation of our “diversified” inventory should still be favorable, with new vehicle inventory being up and used vehicle inventory being down. 嗯，事情就是这样发生的.

Here is what we are seeing as we finalize 2022 税 returns:

• New vehicles – Dealers’ new inventory levels are back up and had 6% inflation.
• 汽车零部件——这个库存有10%的通货膨胀.
• Used vehicles – Dealers’ used inventory levels did drop and did have deflation of 9%.

如果你想想这是怎么回事, the weighted average used to calculate the current-year inflationary index considers the inventory values and the new, 二手及零配件库存指标. With new inventory coming back (and we are seeing higher levels of new inventory than used vehicles), the calculation indicates positive indexes for the current year, 哪个是好的结果.

如你所知，我们喜欢把事情想透彻. When we changed most dealers’ accounting methods in 2021 to the IPIC method, we anticipated some drastic changes to used vehicles for the following year, but we were prepared: We knew that combining the inventory pools saved the day in 2021. 然后在2022年, 再一次, 使用组合池方法, 大多数经销商的后进先出储备都有所增加.

关于施耐德唐斯汽车工业集团 

The Schneider Downs 汽车 industry group serves dealers of all sizes, 从单一地点到大型经销商. Our members cross departments and meet regularly to ensure efficiencies in the services provided to our clients and discuss issues, 影响汽车行业的法规和趋势.  

To discuss, please reach out to Steve Barber or any of the other SD Auto Advisors. 欲了解更多信息，请访问我们的 汽车工业集团 页面.