Buy Here Pay Here: Repossession or Charge-Off?

By Deal Pack - November 19, 2012

With respect to a BHPH dealership, what are they and how are they different? Well, a repossession is taking back your asset, while a charge off is expensing a receivable, taking it off your balance sheet.


This is important to take note, since these words can be used interchangeably in the industry, but mean to different things. In Deal Pack, we make the distinction between the two. If you are processing repossession, at the time you complete the process we ask for an ACV (actual cash value) of the asset you are securing so that we can make the necessary journal entries to your customer’s deficiency balance and inventory. In contrast, if you process a charge off, no ACV is entered and the customer’s deficiency balance is not reduced by the value of the asset. The difference in the two is simply that a charge off means you didn’t secure the asset.


From there, both of the balances are expensed, commonly referred to as ‘charged off’ or ‘put to bad debt’. Whether you get the asset back or not, Deal Pack makes the appropriate accounting entries and the customer’s account will be updated with a deficiency balance.

Subscribe to Deal Pack Blog