Revenue Recognition
Revenues are generated principally from the sale of used vehicles, which in most cases includes a service contract and an accident protection plan product, as well as interest income and late fees earned on finance receivables. Revenues are net of taxes collected from customers and remitted to government agencies. Cost of vehicle sales include costs incurred by the Company to prepare the vehicle for sale including license and title costs, gasoline, transport services and repairs.
Revenues from the sale of used vehicles are recognized when the sales contract is signed, the customer has taken possession of the vehicle and, if applicable, financing has been approved. Revenues from the sale of vehicles sold at wholesale are recognized at the time the proceeds are received. As discussed in Change in Accounting Estimate, beginning in the quarter ended October 31, 2024, revenues from the sale of service contracts are recognized ratably over a nine-month term for each 12,000 miles. Service contract revenues are included in sales and the related expenses are included in cost of sales. Accident protection plan revenues are initially deferred and then recognized to income using the “Rule of 78’s” interest method over the life of the contract so that revenues are recognized in proportion to the amount of cancellation protection provided. Accident protection plan revenues are included in sales and related losses are included in cost of sales as incurred. Any unearned revenue from ancillary products is charged-off at the time of repossession. Interest income is recognized on all active finance receivables accounts using the simple effective interest method. Active accounts include all accounts except those that have been paid-off or charged-off.
Sales consist of the following for the years ended April 30, 2025, 2024 and 2023:
| | | | | | | | | | | | | | | | | |
| | Years Ended April 30, |
| (In thousands) | 2025 | | 2024 | | 2023 |
| | | | | | |
| Sales – used autos | $ | 987,346 | | | $ | 1,003,640 | | | $ | 1,057,465 | |
| Wholesales – third party | 40,070 | | | 52,463 | | | 54,610 | |
| Service contract sales | 83,753 | | | 67,213 | | | 57,593 | |
| Accident protection plan revenue | 35,039 | | | 37,482 | | | 34,526 | |
| | | | | |
| Total | $ | 1,146,208 | | | $ | 1,160,798 | | | $ | 1,204,194 | |
From 2023 to 2025, sales performance reflected a mix of macroeconomic factors and company-specific developments. Used vehicle sales revenue declined primarily due to a reduction in unit sales. Wholesales revenue also decreased as a result of lower volumes of repossessed vehicles available for resale. Conversely, service contract sales increased, driven by a higher contract pricing and the change in accounting estimate implemented in October 2024, which impacted the timing of revenue recognition. Accident protection plan revenue remained relatively consistent throughout the years.
At April 30, 2025 and 2024, finance receivables more than 90 days past due were approximately $5.7 million and $4.5 million, respectively. Late fee revenues totaled approximately $5.3 million, $4.9 million, and $4.4 million for the fiscal years ended 2025, 2024, and 2023, respectively. Late fees are recognized when collected and are reflected within interest and other income on the Consolidated Statements of Operations.
During the years ended April 30, 2025 and 2024, the Company recognized $34.4 million and $34.8 million of revenues that were included in deferred service contract revenues for the years ended April 30, 2024 and 2023, respectively.