Here's a question I have always wondered. Do dealerships own their inventory or is it on some kind of a lease deal or something from the manufacturer? Just curious.

surewhynot said:

Here's a question I have always wondered. Do dealerships own their inventory or is it on some kind of a lease deal or something from the manufacturer? Just curious.

Click to expand...

A lot depends on the individual dealership. Some have the "Corporation" foot the bill, and they pay interest on everything, others use an independent "Floorplan", meaning, they have a separate lending institution handle the money.

Thanks Vince. Down here, we have some of the biggest RV lots in the country. It isn't uncommon to pass an RV dealer that has a hundred or so million dollar rigs on the lot. I bet that will make an owner sweat in this economy.

The dealer I work for owns all the cars on the lot. I also agree with what Vince said.

Each manufacturer is different. GM let's us "floor" the cars (finance) for free for 60 days. Then interest kicks in, but at a lower rate for the next 90 days. After that, it''s full-bore. Flooring rates are frightening right now- LIBOR plus 6.5, so that translates into about 9.75%. Yikes!!! It's killing a lot of dealers.

We don't floor with GMAC, so we take the flooring credits in cash and book it towards operating profit. It doesn't take a genius to figure out that fast-turn is a key to profitability, which is kind of my job- make sure we inventory only the fastest turning stock. That's why I chuckle over the "why don't they offer __________ (fill in the obscure powertrain/option combo)." Doesn't matter to me if they do or don't- if it doesn't turn quickly, I ain't stocking it.

That also explains why dealers stock only the most sought after combination's. Hopefully some people will begin to understand better now. Thanks.

surewhynot said:

Thanks Vince. Down here, we have some of the biggest RV lots in the country. It isn't uncommon to pass an RV dealer that has a hundred or so million dollar rigs on the lot. I bet that will make an owner sweat in this economy.

Click to expand...

The big one in this town recently closed a couple of months ago, they had like huge rigs at a 70% discount. RVs are dumb purchases though, they depreciate more than pretty much anything else besides electronics....