Report: Escalating Inventories Erode Dealer Profits

(Bobit) — Near-record-high new-vehicle inventories and rising interest rates for floorplan financing are eating away at dealership profits, according to a new report in Automotive News. The AN Data Center puts the supply of unsold vehicles at 4,188,200 at the start of April. That’s only about 100,000 fewer than factories and dealers had on hand in May 2004, the all-time record high, and more than half a million more than were reported at this time in 2007, on the eve of the Great Recession.

The biggest overstockers are the Detroit 3 manufacturers: Fiat Chrysler leads the nation with a full 90-day supply (666,700 units), then Ford (84 days/715,600 units), then General Motors (83/835,500). Together, they account for more than half of America’s unsold new cars and light trucks.

Compounding the issue are floorplan interest rates, which have grown as high as 5% to 5.5% for some dealers, up from around 1.5% just a few years ago, according to the report.

For top 10 new- and used-vehicle retailer Asbury Automotive Group, that translates to rapidly escalating floorplan expenses, which had already increased by 55% year-over-year in Q1, according to CEO David Hult.

“Right now, there’s excessive inventory out there, and there’s a tremendous amount of pressure from almost all the brands to take additional cars,” Hult told AN, adding, “Space is absolutely an issue, and we’re bursting at the seams. We might even have some of it stored offsite.”

To read the full Automotive News report, click here.

Originally posted on Auto Dealer Today