Auto Dealer LIFO – Conformity Warning & IPIC Estimates

Like kids waiting for Santa Claus to come down the chimney on Christmas Eve, we’re waiting for the BLS to release the CPI inflation index for auto dealers for December.

Based on projections we’ve done for many, many IPIC LIFO dealerships reflecting estimates (of course), we’re finding inflation rates up to 5% and deflation rates as low as 2.5%, all depending on the mix of new, used and parts dollars in the projected inventory level.

Let us know if your estimates don’t fall within this range.

Incidentally, we’ve been informed that one 20 Group administrator has asked dealerships to not include a LIFO adjustment on their year-end December statement when it is sent in for composite analysis. We strongly disagree with their suggestion. We fear that any year-end statement – even for this purpose -¬ would violate the conformity requirement and be fatal to the LIFO election if a good-faith estimate is not reflected on that year-end statement.

Beware if you are tempted in this direction. If they have to take the LIFO adjustment out in order to prepare dealership composites, I think that’s out of your hands. But, if you make it easier for them by not reflecting the LIFO adjustment in the year-end statement, then my opinion is that you have violated the LIFO conformity requirement.

Happy New Year!

~ Will De Filipps