Contracts in transit definition
/What are Contracts in Transit?
Contracts in transit are receivables due from finance companies that have paid for customer purchases. The concept usually applies to vehicle purchases, but can also involve other expensive merchandise.
Contracts in transit comprise a large part of the cash inflow of a car dealership. That being the case, dealerships have an interest in shortening the duration of their contracts in transit to the minimum possible time. This can be accomplished with the electronic transfer of contract information, tightly-applied contract submission procedures, the rapid correction of errors and omissions, and a well-trained staff.
Contracts in transit are classified as short-term assets, and so are reported as a receivable within the current assets section on a dealership’s balance sheet.