Floor Plan Interest: What a Car Really Earned on Your Lot

By Jeff Bibby, CPA · November 8, 2026 · 4 min read

On a deal sheet, a car that sold for $14,500 after $12,000 purchase and $600 of reconditioning made $1,900. That's the number most dealers carry in their heads. It leaves out what it cost to hold the car.

If you finance inventory through a floor plan, every day a car sits on the lot costs you interest. For an independent dealer, that's often the difference between a car that made good money and one that barely paid for itself.

What a slow car really costs

Here is an illustration. Say the floor plan rate is 9% and you finance the full $12,000 purchase price. Interest runs about $3 a day.

• Sold in 75 days: about $222 of interest. The $1,900 deal sheet profit becomes about $1,678.
• Sold in 150 days: about $444 of interest. The same car now earned about $1,456.
• Add a curtailment payment on an aging unit and your cash is tied up even longer, whatever the profit says.

The rate, the amount financed and the days on the lot will be different for your cars. The point is that the deal sheet profit and the real profit are not the same number, and the gap grows with every week a car doesn't sell.

Track interest by the car, not just by the month

Your lender bills floor plan interest in total. Your books usually show it as one line. Neither tells you which cars are costing you the most.

At least once a quarter, look at it by vehicle: purchase price, reconditioning, interest carried, and the sale price. Sort by days on the lot. The oldest cars tell you what to price down, what to stop buying and where your reconditioning dollars are going.

Reconcile three sets of numbers every month

A dealership usually has three places that say what's on the lot and what you owe on it. They should agree at the end of every month:

1. Your dealer software: the vehicles in stock, with their cost.
2. Your lender's floor plan statement: the units financed and the balance owed.
3. Your accounting records: the inventory and floor plan balances on the balance sheet.

When they don't agree, the cause is usually something small: a car sold but not paid off, a payoff in the wrong month, a unit booked at the wrong cost. Small errors that sit for a year turn into a mess at tax time. A monthly close catches them while they're still easy to fix.

The tax side, briefly

Floor plan interest is generally deductible as a business expense. Federal law also gives floor plan financing interest special treatment under the business interest limit: it isn't held to the 30% cap that applies to other business interest, such as interest on a mortgage for your building or a loan for equipment.

Dealers who also run a repair shop should read our year-end planning guide for auto repair shops, since equipment purchases have a December 31 deadline.

Checklist for this month

• Pull your lender's floor plan statement and compare it to your dealer software's inventory.
• List every car on the lot more than 90 days and what it has cost you in interest so far.
• Make sure sold cars have been paid off with the lender and booked in the right month.
• Have your books reconciled through October before year end.
• Call us if the three numbers don't match.

If you want a second set of eyes on how your books, your dealer system and your lender line up, that's what we do for dealerships.

This article is general information, not tax or legal advice for your specific situation. Tax rules change; talk with us before acting on it.