The Rising Cost of Floor Plan: How Dealerships are Struggling with Inventory Financing

💰Floor plan costs have become a material expense for dealerships due to the increasing cost of financing their inventory.

📊Dealerships are concentrating on reducing aged inventory to cut down on floor plan expenses.

🔍Customers can negotiate better deals on older inventory to help dealerships reduce their floor plan costs.

📉Interest rates have gone up, making it more costly for dealerships to finance their new and used car inventory.

💼Dealerships need to find ways to improve their cash flow, as floor plan costs can impact their ability to meet other financial obligations.

What is floor plan?

—Floor plan is the cost of financing a dealership's inventory, including both new and used vehicles.

Why have floor plan costs become a significant expense for dealerships?

—The increasing cost of financing, as interest rates rise, has resulted in higher floor plan costs for dealerships.

How can customers benefit from the rising floor plan costs?

—Customers can negotiate better deals on older inventory that has been sitting for a long time, helping dealerships reduce their floor plan costs.

Will the industry see more dealerships struggle with floor plan costs?

—Yes, it is expected that more dealerships will face challenges with floor plan costs, which may lead to some going out of business or consolidation.

What should dealerships do to mitigate the impact of floor plan costs?

—Dealerships should focus on reducing aged inventory, adjusting pricing and commission structures to encourage salespeople to move older units first.

00:00Dealerships are facing higher floor plan costs as their inventory sits due to the increasing cost of financing.

02:40Floor plan costs have become a material expense for dealerships due to the increasing cost of financing their inventory.

03:41Dealerships need to find ways to improve their cash flow, as floor plan costs can impact their ability to meet other financial obligations.

05:15Customers can negotiate better deals on older inventory to help dealerships reduce their floor plan costs.

06:43It is expected that more dealerships will face challenges with floor plan costs, which may lead to some going out of business or consolidation.