Ford dealers get a break as inventory carrying costs rise

Ford is aiming to address a major concern among its dealer network: the increasing costs associated with carrying more inventory. 

The details: According to an Automotive News report, Ford is increasing its floor plan assistance for dealers, beginning in April, to relieve its retailers of some of the pain they’ve been bearing for the excessive number of vehicles sitting on their showroom floors.

Above is a graph showing the average market days’ supply of vehicles on dealership lots by brand. Days’ supply in this context means it would take Ford dealers, on average, 113 days to sell all of the new car inventory they have.

• Ford is increasing its floorplan credit by 25%, meaning dealers will receive an upfront credit worth 1.25% of the sticker price on most ICE retail vehicles.

• Rob Kaffl, Ford’s director of U.S. sales, told Automotive News that the automaker will evaluate the level of assistance needed each quarter, adjusting the percentage up or down based on interest rates and inventory levels.  

• Ford will continue to provide dealers with the standard 1% credit for electric vehicles. 

The automaker’s move to increase dealers’ floor plan credit—announced at Ford’s NADA Show make meeting—received high praise from the Ford National Dealer Council, representing Ford’s US retail network. The automaker also announced some product news at the dealer meeting, including a more strategic mix of lower-priced trims for the F-150, Escape, and Explorer to fit specific regions around the country, Automotive News reports.

This is good news for dealers: Floorplan expenses (the associated costs of financing vehicle inventory) have been a massive factor in increasing costs for dealerships.

What they’re saying: “The level of engagement they’ve had with us and the action they just took was unbelievable. That’s a big, big deal,” Eddie Stivers, Chairman, Ford National Dealer Council.

Between the lines: News of the 25% credit increase marks the second time within a year that Ford has modified how it compensates dealers for holding inventory. 

• At one point, Ford reimbursed dealers for their floorplan interest charges based on the length of time a vehicle stayed in a dealer’s stock, up to 75 days—a plan implemented in 2022. 

• In 2024, Ford resorted back to its percentage-based credit strategy, which had been in place prior to the 2022 change that was aimed at addressing inventory challenges during the semiconductor shortage.  

Bottom line: Ford’s decision to raise the floorplan credit (for retail ICE vehicles) for its dealers is a smart business move by the automaker. In addition to helping its retailers minimize some of their losses associated with high inventory, the move could also go a long way in helping Ford enhance its relationship with its dealer body overall, which could use some improvement, as detailed in a recent dealer survey. 

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