New-vehicle holding expense is the fastest-growing line item on dealers’ financial statements this year. NADA is reporting dealers are on pace to spend upwards of $140,000 in holding costs in 2019, which is a $250,000 turn in the wrong direction, compared to just a few years ago when floor plan credits were a source of profit.

The old adage, “Car guys always work their pay-plan,” is as true today as it ever was. I meet with general sales managers, desk managers, and inventory managers across the country, and less than 10% have pay plans tied to inventory investment performance. On the other hand, used car managers figured out a long time ago that aging vehicles never did much to help their pay-checks. Unfortunately, most new car managers have never felt a prick of pain on this topic.

I believe part of the reason for this oversight is that our industry lacks the insight and tools for managing new car inventories as an investor would. It can be hard to hold your sales and inventory managers accountable when the factory often provides an incomplete view.

If you’re attending Digital Dealer 27, make sure to attend my session, “Investment-Minded New Car Inventory Management,” which will review fundamental best practices that demonstrate how you can increase the rate of return while reducing the expenses on your new vehicle inventory.

I will share an entirely new way of categorizing your inventory into four different asset classes. I will also identify best practices for pricing and promoting each asset class.

Although the interest rate environment has become more expensive, investment-minded dealers are still cashing floor plan profits, while the speculators are writing floor plan checks.