Every day a vehicle sits on the lot past its curtailment gate, it isn't just costing interest. It is destroying the compounding return that same capital would generate in the dealer's fastest-turning department. This analysis quantifies that spread.
$92,993
Spread per unit (180d, linear)
5.2x
Capital multiplier (compound)
$1.5M
Sample Store (180d, governed)
$818.6M
Top 7 groups (annualized, moderate)
01 Single Unit Deep Dive
The Birthday Boy: $50,000 Vehicle at Chase
Day 364. You forgot about that year-old unit. Tomorrow Chase pulls $50,000 from your operating account. The car still doesn't sell for another 180 days. Here is what that costs you.
Scenario A — Business as Usual
Vehicle sits 180 more days. Chase forces full payoff.
Sunk carrying cost (365d at 6.8%)-$3,400 (sunk, both scenarios)
Chase admin fee-$100
Cash extracted from operations-$50,000
Post-payoff interest$0 (stops after payoff)
Depreciation (180d at 1.5%/mo)-$4,500
Avoidable costs (B avoids these)-$4,600
Total Holding Cost-$8,000
Capital earning $0 for 180 days while depreciating
vs.
Scenario B — Floorless Swap
Swap before day 365. Capital freed in 15 days. Deployed in parts.
Capital preserved+$50,000
Effective deployment days165 days
Parts turns (14d cycle)11.8 turns
Parts gross profit (linear)+$88,393
Parts profit (compound)+$209,620
Total Position (linear)$138,393
Compound: $259,620 (5.2x on capital)
The Negative Carry Spread (one unit, 180 days):
Linear: $92,993 in combined damage + forfeited returns.
Compound: $214,220 when gross profit is reinvested into additional parts inventory.
That is the real cost of one unit sitting for 180 days. Not just the 6.8% interest. Not just the depreciation. The full economic spread between dead capital and working capital.
Why This Is Worse Than It Looks
The Revolving Line Trap
The floorplan line is revolving. When Chase forces the $50K payoff, that freed capacity is immediately consumed by new factory allocations. The dealer's total debt doesn't decrease — the cash simply leaves their operating account. They're still flooring the same number of cars. They just have $50K less cash to run the business.
The L+7 Rebuttal
"But There's No More Carrying Cost..."
Someone will say: "If Chase makes you pay off the car, you aren't financing it anymore. No carrying cost." Correct. The floorplan interest stops. But the $50K is now trapped in a depreciating asset earning zero. That same $50K in parts generates $88,393 over the same 180 days. The carrying cost was never the real problem. The opportunity cost is.
02 The Compounding Table
Turn by Turn: $50,000 in Parts vs. Sitting Idle
Every 14 days, the parts department sells through and re-buys inventory. Each turn generates 15% gross on the deployed capital. The idle column shows the same $50,000 sitting in a year-old car, earning nothing.
Capital Growth: Idle vs. Linear vs. Compound (13 turns / 182 days)
Idle (dead capital)
Linear (base turns only)
Compound (reinvested)
Turn
Day
Idle Value
Linear Total
Compound Total
Spread (Linear)
Spread (Compound)
0
0
$50,000
$50,000
$50,000
$0
$0
1
14
$50,000
$57,500
$57,500
$7,788
$7,788
2
28
$50,000
$65,000
$66,125
$15,575
$16,700
3
42
$50,000
$72,500
$76,044
$23,363
$26,907
4
56
$50,000
$80,000
$87,450
$31,151
$38,601
5
70
$50,000
$87,500
$100,568
$38,938
$52,006
6
84
$50,000
$95,000
$115,653
$46,726
$67,379
7
98
$50,000
$102,500
$133,001
$54,514
$85,015
8
112
$50,000
$110,000
$152,951
$62,301
$105,253
9
126
$50,000
$117,500
$175,894
$70,089
$128,483
10
140
$50,000
$125,000
$202,278
$77,877
$155,155
11
154
$50,000
$132,500
$232,620
$85,664
$185,784
12
168
$50,000
$140,000
$267,513
$93,452
$220,965
13
182
$50,000
$147,500
$307,639
$101,240
$261,379
The multiplier effect: After 13 turns (182 days), $50,000 deployed in parts at 15% gross per turn becomes:
• Linear: $147,500 ($97,500 in cumulative gross profit)
• Compound: $307,639 (5.2x capital multiplier)
Meanwhile, the idle $50K generates $0. The spread after 180 days is $261,379 in combined opportunity cost.
Compounding qualification: The "compound" column assumes all gross profit is reinvested into additional parts inventory.
In practice, parts gross must cover departmental overhead (labor, freight, returns), so full compounding is an upper bound.
The linear column is the conservative floor — it assumes only the original $50K base capital turns each cycle.
Most dealers operate between these bounds. Even the conservative linear scenario produces $97,500 vs. $0.
Note on the 14-day turn cycle: This table uses a 14-day fast-turn subset. NADA's blended average is ~45 days (8 turns/year).
However, NADA also reports parts gross margins of 32-41% on sales (48-67% markup on cost) — 3-5x our 15%.
At NADA's 45-day turn with NADA's actual margins, the linear profit is equivalent or higher.
See Section 02b for the dual-axis robustness proof.
02b NADA Reality Check
15% Is Not Conservative. It Is Absurd.
The NADA 2025 Slide Guide targets 40% gross profit on parts sales. The ATA Benchmarking 2023 (NADA-derived) reports actual composites of 32.4% to 35.4% across dealer types. Our model uses 15% markup on cost — which translates to 13% gross on sales. That is less than one-third of the actual NADA composite and below even the lowest parts category (wholesale at 15.9-22.2%).
NADA Parts Gross Sensitivity ($50K deployed, 165 days, 14-day turns)
Parts Gross Category
GP on Sales
Markup on Cost
180d Parts Profit
Neg. Carry Spread
vs. Model
Source
Our Model (Floor Case)
13.0%
15.0%
$88,393
$92,993
1.0x
Scenario input — intentionally below all NADA benchmarks
Wholesale (Lowest NADA)
16.9%
20.3%
$119,625
$124,225
1.4x
ATA Benchmarking 2023: Domestic 16.8%, Import 15.9%, Highline 22.2%
Counter Retail
31.1%
45.1%
$265,768
$270,368
3.0x
ATA Benchmarking 2023: Domestic 29.5%, Import 35.0%, Highline 28.6%
Total Dept (Import, Lowest)
32.4%
47.9%
$282,268
$286,868
3.2x
ATA Benchmarking 2023: Import dealer composite 32.4%
Total Dept (Highline)
34.0%
51.5%
$303,482
$308,082
3.4x
ATA Benchmarking 2023: Highline dealer composite 34.0%
Total Dept (Domestic)
35.4%
54.8%
$322,929
$327,529
3.7x
ATA Benchmarking 2023: Domestic dealer composite 35.4%
Customer Pay (Domestic)
37.6%
60.3%
$355,339
$359,939
4.0x
ATA Benchmarking 2023: Domestic customer pay 37.6%
NADA 2025 Guide Target
40.0%
66.7%
$393,054
$397,654
4.4x
NADA Slide Guide 2025: 'Parts Gross % Sales: 40%'
Customer Pay (Highline)
41.0%
69.5%
$409,554
$414,154
4.6x
ATA Benchmarking 2023: Highline customer pay 41.0%
Warranty (Domestic, Highest)
44.2%
79.2%
$466,714
$471,314
5.3x
ATA Benchmarking 2023: Domestic warranty 44.2%
The real story is substantially worse than our model shows.
At the NADA 2025 guide target (40% gross on sales = 66.7% markup on cost), a $50K parts deployment generates
$393,054 in gross profit over 165 days — a negative carry spread of
$397,654 per unit.
Even at the lowest NADA composite (Import dealer total dept, 32.4% GP on sales = 47.9% markup), the spread is
$286,868 — still 3.2x our model.
Our 15% figure is not "conservative." It is a floor case designed to survive any scrutiny. No franchise parts department in the NADA dataset operates at margins this low. The actual negative carry problem is 3-5x worse than this analysis shows.
NADA 2025 Slide Guide
Parts Gross % Sales: 40%
"Parts Gross % Sales .... 40%"
"(lower if high-wholesale volume)"
Source: NADA 2025 Formulas, Definitions and Guides (slideguide.nada.org). The 40% target is the industry standard for a well-run parts operation. It corresponds to a 66.7% markup on cost — 4.4x our model.
Parts Inventory Turnover target: 8 per year (~45 days). Our model uses 14 days (fast-turn subset).
ATA Benchmarking 2023
Actual Composites: 32.4% — 35.4%
Domestic: Total dept 35.4% GP on sales (54.8% markup) Import: Total dept 32.4% GP on sales (47.9% markup) Highline: Total dept 34.0% GP on sales (51.5% markup)
Customer pay (where freed capital would deploy) runs 37.6% — 41.0% on sales (60-70% markup). Warranty runs even higher.
Source: AutoTeam America / NADA-derived, 2023 data (latest published composite).
Dual-Axis Robustness: Fast Turn / Low Margin vs. Slow Turn / Real Margin
The @razor-critic flagged our 14-day turn as aggressive (NADA average: ~45 days). Fair objection. But NADA also reports margins 3-5x higher than our model. What happens when you use NADA-verified values for both parameters?
Parameter Set
Markup on Cost
Turn Cycle
Turns (165d)
Parts Profit
Neg. Carry Spread
vs. Model
Our Model (fast turn, floor margin)
15.0%
14 days
11.8
$88,393
$92,993
baseline
NADA Import (lowest composite)
47.9%
46 days
3.6
$86,661
$91,261
1.0x
NADA Domestic (35.4% GP/sales)
54.8%
46 days
3.6
$99,145
$103,745
1.1x
NADA Customer Pay Avg
60.3%
46 days
3.6
$109,095
$113,695
1.2x
NADA 2025 Guide Target (40%)
66.7%
46 days
3.6
$120,674
$125,274
1.4x
NADA Warranty Domestic (highest)
79.2%
46 days
3.6
$143,289
$147,889
1.6x
Dual-axis convergence: Our fast-turn/low-margin model ($88,393) lands within 1% of the NADA slow-turn/real-margin lowest composite ($86,661).
This means the per-unit number holds regardless of which axis a critic attacks:
• Challenge the 14-day turn rate? Fine — use NADA's 45-day average. But then you accept NADA's actual margins (48-67%), and the number is the same or higher.
• Challenge the 15% margin? Fine — use NADA's verified margins. But then the number explodes to $109,095 – $120,674 even at our turn rate.
• Challenge both? Then you are contradicting NADA's own published data.
The $92,993 per-unit spread is not an optimistic projection. It is the convergence point of two independently sourced parameter paths. The actual problem, at NADA-verified margins, is substantially worse.
03 Store-Level Impact
Real Store, Real Data: 313 Aged Units, $17.6M at Risk
An actual Stellantis franchise in a top-25 metro. 47% of inventory is aged past 90 days. Three scenarios stress-tested with a parts department capacity governor that caps parts deployment at $500,000 per store.
Current State
670 total units · 313 aged past 90d
33 units past 180 days $17.6M in capital at risk on aged units
Average aged unit value: $56,230
Brand family: Stellantis (CDJR) · Market: Top-25 Metro
20+ same-brand dealers in-state with swap potential
Capacity Governor
Parts Dept Ceiling: $500,000
A parts department cannot absorb unlimited capital. The governor caps parts deployment and routes excess freed capital to lower-return alternatives (used inventory, debt reduction) at 5.0% annual return.
This is the key constraint that makes store-level numbers defensible.
Three Scenarios: Sample Stellantis Store (180 days, capacity-governed)
Scenario
Swap Rate
Units Swapped
In Parts
In Alternatives
Parts Profit
Alt. Profit
Avoidable Costs Saved
Governed Total
Conservative 15% swap, 35d exec, 30d turn
15.0%
46
8
38
$362,500
$41,446
$530,331
$934,277
Moderate 25% swap, 25d exec, 21d turn
25.0%
78
8
70
$553,571
$82,510
$899,257
$1.5M
Aggressive 50% swap, 15d exec, 14d turn
50.0%
156
8
148
$883,929
$186,967
$1.8M
$2.9M
Governed, stress-tested numbers: With the parts capacity governor ($500,000 ceiling), this store's 180-day negative carry recovery ranges from
$934,277 (conservative) to
$1.5M (moderate) to
$2.9M (aggressive).
The moderate scenario is the recommended reference for outreach and investor materials.
Why the governed total is lower than raw per-unit math: The raw linear spread ($110,936 per unit × 156 units = $17.3M) assumes every dollar of freed capital earns parts-level returns. In reality, a parts department can only absorb $500,000 in incremental inventory. The governed model routes excess capital to lower-return alternatives. This constraint is what makes the numbers defensible in investor conversations.
04 Group-Level Scale
The Network Effect on Negative Carry
Seven public dealer groups. 1,520 US stores. All figures below are capacity-governed (parts department ceiling of $500,000 per store, excess at 5.0% alternative return).
Multi-Lender Comparison ($50K unit, linear spread by time horizon)
Lender
Gate
APR
30d
60d
90d
120d
150d
180d
Chase (JPMorgan)
365d
6.8%
$8,886
$25,707
$42,529
$59,350
$76,171
$92,993
Ally Financial
180d
7.8%
$9,311
$26,641
$43,956
$61,256
$78,542
$95,815
Chrysler Capital
180d
8.0%
$10,269
$28,494
$46,643
$64,722
$82,735
$100,685
NextGear Capital
60d
9.8%
$12,029
$31,803
$51,315
$70,592
$89,656
$108,530
Blended (6-Lender Avg)
237d
7.8%
$9,875
$27,737
$45,554
$63,327
$81,060
$98,753
Scale interpretation (governed, moderate scenario): Across the top 7 public dealer groups at 15% swap adoption with parts capacity constraints, the 180-day governed recovery totals $403.7M — annualized to $818.6M.
These are capacity-constrained, stress-tested numbers. The raw per-unit math ($1.17B unconstrained) is shown for context but is not the recommended reference for investor conversations.
These 7 groups represent approximately 8% of the ~18,000 US franchise dealerships. The total addressable negative carry across the industry is an order of magnitude larger.
05 Source Verification
Every Claim, Sourced
Source-verified accuracy protocol applied to every assumption, metric, and projection in this analysis.
Assumption / Metric
Value
Source
Status
Parts gross margin per turn (model)
15% markup on cost (13% GP on sales)
Intentional floor case. Below all NADA benchmarks. See Section 02b.
Scenario Input (Floor)
Parts GP — NADA 2025 Guide
40% of sales (66.7% markup on cost)
NADA 2025 Formulas, Definitions and Guides (slideguide.nada.org). Industry target.
Key qualification: The "compound" figures assume full reinvestment of parts gross profit into additional inventory.
In practice, parts gross covers departmental overhead (labor, freight, warranty returns, obsolescence).
The linear figures are the defensible conservative floor.
The compound figures represent the theoretical upper bound if the parts department has unlimited absorption capacity.
Real-world results fall between these bounds, closer to linear for most stores.
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