5 Strategies to Cut Floor Plan Interest 30% Without Reducing Inventory
"We can't reduce inventory—we need selection to drive traffic."
Every dealer says it. Most are wrong about what "selection" actually means to customers. Meanwhile, floor plan interest bleeds profit that could fund marketing, facility upgrades, or compensation.
The good news: You can significantly reduce floor plan costs without gutting your inventory. It requires strategic management, not desperate liquidation.
Strategy 1: The 60-Day Hard Stop
Establish a firm policy: No vehicle sits beyond 60 days at full retail price.
Why 60 days?
- After 60 days, the unit has been seen by the majority of local market buyers
- Floor plan interest starts meaningfully eroding profit
- Market perception shifts from "new inventory" to "aging stock"
Implementation:On day 45, trigger automatic price adjustment. On day 60, aggressive markdown or wholesale evaluation. On day 75, mandatory action—retail at reduced price or wholesale immediately.
A $35,000 unit at 7% APR costs $6.71/day. Hold it 90 days and you've paid $604 in interest. Hold it 120 days: $805. That extra 30 days of hoping for full retail costs you $201 that you'll never recover.
Use the floor plan interest calculator to track each unit's accumulated interest. When interest exceeds 8-10% of expected gross profit, you're gambling with money you don't have.
Strategy 2: Stock What Actually Sells
Your inventory should reflect your sales mix, not your buyer's preferences or manufacturer incentives.
The Data Exercise:Pull your last 90 days of sales. Break down by:
- Make/model
- Trim level
- Price point
- Color
- Age at sale
Now compare that to your current inventory mix. The mismatches reveal your floor plan waste.
Common Discoveries:
- You stock 15 crew cab trucks but sell 8 regular cabs monthly
- 20% of inventory is $45K+ units, but 60% of sales are under $30K
- White and silver account for 40% of sales but only 15% of inventory
Every unit that doesn't match your sales profile sits longer, accumulating interest while the units you actually need get sold before they arrive.
Strategy 3: The Velocity-Based Acquisition Model
Not all inventory deserves equal investment. Tier your buying based on historical velocity:
Tier 1 - Fast Movers (15-30 days average):Stock these aggressively. Low days-in-stock means minimal floor plan impact. A unit costing $8/day in interest but selling in 20 days only accumulates $160—acceptable cost of doing business.
Tier 2 - Standard Movers (31-50 days):Stock at planned levels but watch closely. These are your core inventory. Manage age carefully.
Tier 3 - Slow Movers (51-75 days):Minimal stock. Only acquire when customer deposit or high confidence in quick sale. A vehicle averaging 65 days at $10/day interest costs $650—that's 25-30% of gross profit on many deals.
Tier 4 - Problem Units (76+ days):Avoid entirely unless manufacturer incentives offset floor plan risk.
This model doesn't reduce inventory count—it optimizes inventory composition. You maintain selection while dramatically reducing average days-in-stock and floor plan costs.
Strategy 4: The Interest Offset Pricing System
Most dealers price without factoring accumulated interest into their minimum acceptable offer. This guarantees you're losing money on aging inventory.
New Pricing Framework:
Day 1-30: Normal retail strategyDay 31-45: Begin factoring accumulated interest into deal structure
Day 46-60: Price reflects full interest recovery in asking priceDay 61+: Interest becomes sunk cost—accept offers that clear loan + minimal profit
Example:$32,000 unit, $2,200 gross profit target, 6.5% floor plan rate.
- Day 45: Accumulated interest $256, adjust minimum from $29,800 to $29,550
- Day 60: Accumulated interest $342, adjust minimum from $29,800 to $29,450
- Day 75: Accumulated interest $427, accept any reasonable offer over payoff
The dealership floor plan calculator shows exact interest by day, enabling precise pricing decisions.
Strategy 5: The Inventory Audit System
Weekly inventory meetings waste time unless you're reviewing the right data. Stop talking about total units in stock. Start tracking:
Monday Morning Metrics:
- Units over 60 days (count and total floor plan cost)
- New acquisitions from last week (projected interest at average days-to-sale)
- Wholesale candidates (units where interest now exceeds realistic gross)
- Top 10 interest generators (specific VINs costing the most daily)
Action-Oriented Questions:
- Which units hitting 45 days need immediate price action?
- What's our total exposure on units over 60 days?
- Are we acquiring inventory faster than we're selling?
- Which slow-movers should we wholesale this week?
This framework forces proactive decisions instead of reactive panic when the floor plan statement arrives.
The Compound Effect
Implement all five strategies and floor plan savings compound:
- 60-day policy prevents extreme aging (saves 15-20%)
- Velocity-based buying reduces average days-in-stock (saves 8-12%)
- Interest-offset pricing recovers costs on aging units (saves 5-8%)
- Strategic composition matches sales patterns (saves 10-15%)
- Weekly audits catch problems early (saves 5-10%)
Combined impact: 25-35% reduction in floor plan costs with same or better inventory availability.
Your Next Step
Calculate your current floor plan burden using the calculator. Track it for 30 days. Implement these strategies. Measure the impact.
Most dealers will save $50K-$150K in the first year. That's not revenue—that's pure profit going to your pocket instead of the lender.
