Inventory is driving floorplan risk

A car can get more expensive just by sitting still. A study cited by GM Authority says state franchise rules and dealer inventory practices add $3,934 to $4,992 to the price of a $50,000 new vehicle, and about $1,045 to $1,105 of that comes from inventory alone. (gmauthority.com) That inventory cost starts with floorplan financing, which is a dealer credit line used to stock cars before they are sold. The lender fronts the money for each vehicle, and the dealer pays it back when the vehicle leaves the lot. (occ.gov) The meter runs the whole time the car is parked. The same study says dealers are paying floorplan interest rates between 6% and 9%, so every slow-selling truck or sport utility vehicle turns into a carrying cost that someone eventually tries to recover in the sticker or the deal structure. (gmauthority.com) There is a second inventory bill that is easier to miss. The study says the make-to-stock system adds another $1,600 per vehicle because manufacturers ship cars into the market before a specific buyer exists, which leads to misallocated inventory and more incentive spending later. (gmauthority.com) Dealers used to have a bigger cushion from the service department when sales got tight. Cox Automotive says average dealer service and parts revenue reached about $9.23 million in 2025, but dealer share of service visits still fell from 33% to 29%, which means the revenue line is rising while the customer base underneath it is slipping. (coxautoinc.com) That slide matters because service is the steadier cash flow inside a dealership. Cox says nearly 299,000 auto mechanic businesses now operate in the United States, up 12% since 2018, and dealership service starts with no built-in edge because consumers consider dealerships and general repair shops at the same 41% rate before the first visit. (coxautoinc.com 1) (coxautoinc.com 2) Now add freight. FleetOwner reported on April 9 that dry van linehaul spot rates rose to $2.04 per mile excluding fuel, up 24% from a year earlier, while refrigerated rates reached $2.43 per mile, up 28%, and flatbed reached $2.55, up 19%. (fleetowner.com) Those higher freight rates showed up even as loads fell 9.7% for dry van, 5.7% for refrigerated, and 4.8% for flatbed in the same report. When transport costs rise while demand softens, the cost to move vehicles and parts does not disappear; it sits on inventory longer. (fleetowner.com) That is where curtailments start to matter. Automotive Finance Corporation says a curtailment is a required payment that reduces the loan balance on a vehicle if it has not sold by the end of its initial term, with one example being a partial principal payment after 60 days to get another 60-day term. (autofinance.com) So the risk chain is simple: higher carrying costs make cars pricier, weaker service share leaves dealers with less cushion, and pricier freight slows turns on the same inventory financed with borrowed money. The longer a vehicle sits, the closer the dealer gets to another interest bill, another curtailment payment, or both. (gmauthority.com) (coxautoinc.com) (autofinance.com)