When settling a finance agreement on a part exchange vehicle in Navigator, there are two common methods of posting the settlement: Contra or Cheque. Choosing the correct method is essential for ensuring that vehicle debtors are cleared appropriately and that accounting records remain accurate.
This article explains the differences between the two approaches, when to use each one, and how they affect the debtor position and bank postings.
What is a Contra Settlement?
A Contra Settlement is used when the finance company for the part exchange is the same as the finance company for the host (new) deal. In these scenarios, the finance provider agrees to take on the remaining finance balance of the part exchange and incorporate it into the new finance agreement.
✅ What Happens When You Post a Contra:
The system automatically clears the debtor on the vehicle.
No money is actually paid into or out of the bank.
There’s no need to manually post a receipt — the accounts are balanced through internal clearing.
It simplifies reconciliation when the same finance company is involved.
Example:
Customer trades in a car with a remaining finance balance of £5,000. The same finance company is financing the new purchase. A Contra is posted, and the £5,000 balance is added to the new agreement. The debtor for the vehicle is automatically cleared.
What is a Cheque Settlement?
A Cheque Settlement is used when the finance company for the part exchange is different from the finance company for the host deal. In this case, the customer will make a payment to settle the existing agreement. This is then settled manually.
❗ Key Points When Posting as a Cheque:
The system does not automatically clear the debtor on the vehicle.
Instead, it generates a credit in your bank to represent the outgoing funds.
You must then manually post a receipt against the vehicle debtor to clear the balance.
When to Use Contra vs Cheque
Scenario | Use Contra? | Use Cheque? |
---|---|---|
Same finance company on part exchange and new deal (Provided agreement in place) | ✅ Yes | ❌ No |
Different finance companies | ❌ No | ✅ Yes |
⚠️ Important: If a settlement is mistakenly posted as a cheque when it should have been a contra, it will leave an uncleared debtor, and a receipt will need to be posted manually. Conversely, posting a contra when finance companies differ may result in a mismatch in accounting records.
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