Dealership floorplan revenue expected to dive after years as a profit source

According to Brian Finkelmeyer, Senior Director of New Vehicle Solutions at Cox Automotive, for most automakers, floorplan credits have traditionally been equivalent to 1.5% of the new vehicle bill price. car newsThis assistance is designed to help the dealer cover the interest costs of keeping the vehicle in stock for approximately 90 days.

But with historically low inventories for 2020, 2021 and 2022, and cars arriving at dealerships already being promised to customers, they hadn’t sat in lots for nearly 90 days, so floor plans weren’t in the profit stream. says Finkelmeyer.

Increased inventories will affect that profit stream, but that will vary by manufacturer, Finkelmeyer noted.

“Brands like Toyota, brands like Honda, brands that are still running very low supply days, Kia might be there a little bit too. These dealers will benefit from floor plan credits. We still have drivers that create , and the inventory is changing rapidly,” Finkelmeyer said. “As long as they’re turning the car faster than 90 days, that’s a profit.”

Matthew DeSantis, an analyst at Haig Partners, a Fort Lauderdale, Fla., dealer advisory firm, said: car news That rapid inventory turnover is becoming increasingly important to dealers. Ford Motor Co. has changed the amount of floor plan his credit that dealers receive by switching to a model that covers costs for up to 75 days based on the actual days of inventory. As long as the vehicle is on the premises.

“Historically, dealers received floorplan credit no matter how long the vehicle was parked,” says DeSantis. “We don’t yet know if other automakers will change models.”

Larry Morgan, Chairman of Morgan Auto Group in Tampa, Fla. car news He doesn’t think automakers can help offset rising interest rates above current levels, but his group, the eighth largest distributor group in the country, is willing to act aggressively. It’s a schedule.

“We expect not just current interest rates to rise, but several hundred basis points over the course of the year in 2023,” Morgan said. “We expect [interest] higher rate. Our inventory is at an all-time low. They are slowly improving. It’s by brand, but they’re getting bigger and bigger, so the combined impact of more cars, more inventory and higher rates is certainly adding to our operating expenses. ”

In preparation for declining floorplan profits, Morgan said the group is trying something new this year to speed up inventory turns.

“We told the store that if we weren’t able to sell the stock we had in stock in a reasonable amount of time, we would transfer it to another store with a similar brand,” he said.

“Not just to reduce floor plans, but to sell more vehicles and be more efficient at selling in those stores.”

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