All that inventory
that yousee when driving past a dealership carries with it the cost of interest, or the “floorplan” in dealer
lingo. OEMs already provide some assistance with covering the interest costs of dealership inventory, but slow sales and
the corresponding increase in inventory have compounded with increasing interest rates (3.75% to 7.25% over the past
year) to put the squeeze on dealers.
Subtract the average of $77 in floorplan costs from the fixed profit
of several hundred dollars that certain OEMs were mandating during recent incentive programs, and this relatively
modest cost can take a significant bite from profits. Even so, don’t shed too many tears for your local dealership –
low interest rates in the previous three years have allowed dealers to actually turn a small profit from floorplan
credits.
Rising interest rates hit dealers
All that inventory that yousee when driving past a dealership carries with it the cost of interest, or the”floorplan” in dealer lingo. OEMs already provide some assistance with covering the interest costs of dealership inventory, but slow sales and the corresponding increase in inventory have compounded with increasing interest rates (3.75% to 7.25% over the past year) to put the squeeze on dealers.
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