When should a used car dealer wholesale an aged unit? Floorplan and price-drop math
Short answer: keep a unit listed only while one more day is worth more than it costs — the chance it retails that day times the gap over wholesale, against the day's floorplan interest, the cost of your own cash in it, the lot and insurance, and the wholesale value it loses by sitting. Once that stops being true for good, the auction check today beats the one next month.
A worked lot
Ten units from 6 to 140 days old, floorplan at 9% with curtailments of 10% at 90, 120 and 150 days and payoff at 180, your own cash worth 6% a year, and $6 to $12 a day of insurance, lot and upkeep per unit.
The lot costs $118.80 a day to carry and has already spent $6,877.07. The 140-day Fusion alone has carried $1,412.27.
Three units — the Altima, the Malibu and the Fusion — are worth more wholesaled today, freeing $17,130.00 of floorplan line.
Two more get a date: the Wrangler at day 115 and the Tahoe at day 147 if they have not retailed by then. The other five retail to the limit.
Holding every unit until it retails or hits 180 days is worth $1,117.35 less in expected dollars, and uses 4,164 thousand-dollar-days of line against 2,934.
If freed line would earn $2 per $1,000 a day on a fresh unit, the answer moves: five units go now, freeing $44,380.00, and waiting costs $4,885.68 counting that line value.
What to feed it
Total cost: purchase, buy fee, transport and reconditioning — everything in the car.
Floored amount: what the lender advanced. The rest, and each curtailment you pay, is your own cash.
Expected retail price and how many dollars it falls every 30 days, from your comps and your markdown habit.
Wholesale value today after auction fees, and how fast it falls.
Expected days to retail at that price — one over this is the daily chance of a sale.
Check your floorplan agreement first: curtailment dates, payoff terms and audit rules are your lender's, and they override any plan.
Questions
When should a used car dealer wholesale an aged unit?
When the expected gain from one more day on the lot (the chance it retails times the gap between retail and wholesale) no longer covers that day's carrying cost plus how much the wholesale value falls in a day, and will not again before the floorplan limit. The planner finds that day exactly from your own numbers.
What does it cost to carry a used car on floorplan?
Interest on the balance still owed, what your own cash in the car (equity plus curtailments paid) could earn elsewhere, and insurance, lot and upkeep. On the worked lot that is $118.80 a day across ten units, and $6,877.07 already spent.
Is waiting until it sells a good policy?
Not for every unit. On the worked lot it is worth $1,117.35 less in expected dollars than wholesaling three units now and setting a wholesale day for two more, and it uses about 42% more floorplan line.