Floorplan Interest in 2025: What the Public Groups' 10-Ks Reveal

The Headline Numbers

Every publicly traded dealership group in the United States files a 10-K annual report with the SEC. Buried inside those filings, usually in the consolidated statements of operations or the interest expense footnotes, is a line item called floor plan interest expense. It represents the interest paid on the short-term debt that finances vehicle inventory — the foundational cost of running a franchise dealership.

We pulled those filings for the six largest public groups. Here is what 2024 looks like compared to the years when interest rates were near zero and dealer lots sat half-empty.

Read those numbers again. Penske Automotive Group — one of the largest dealer groups on the planet — paid $189.8 million in floorplan interest in 2024, up 42.6% from the prior year. That is nearly $520,000 per day in interest expense, just on vehicle inventory.

Asbury's story is the most dramatic. In December 2023, they closed the $1.5 billion acquisition of Jim Koons Automotive Companies, adding 20 dealerships and $256 million in new vehicle floor plan financing to their balance sheet overnight. The result: their floorplan interest expense went from single-digit millions to nearly $90 million in a single calendar year. But even without the Koons acquisition, the rate environment alone would have driven enormous increases.

The Before and After

To understand what happened, you need to hold two pictures in your mind simultaneously.

2021: SOFR was functionally zero. The Federal Reserve had slashed rates to the floor during the COVID-19 emergency. Simultaneously, the global semiconductor shortage throttled vehicle production. Dealer lots were bare. Some franchises had single-digit days' supply. Vehicles sold the day they arrived at the port, sometimes before. Floorplan balances were microscopic because there was nothing to floor.

2024: SOFR peaked above 5.3% before settling to approximately 4.3% by year-end. Vehicle production fully recovered to pre-pandemic levels. New vehicle inventory nationwide climbed to 2.8 million units — a 22% increase over 2023 — with days' supply reaching 47 days, up from 41 the year before.

Both variables in the floorplan interest equation — the rate and the principal — moved in the same direction at the same time.

The Rate Environment: 2020–2025

The Federal Reserve's rate cycle is the primary driver. Here is the path of the effective federal funds rate (which closely tracks SOFR, the benchmark most floorplan lenders use) from the start of the pandemic through today.

Notice the shape: rates moved from essentially zero to above 5% in less than 18 months, and they have stayed above 4% for more than two years. The three 25-basis-point cuts in late 2024 brought rates down from the peak but nowhere close to the near-zero levels of 2020–2021. As of early 2026, the effective rate sits around 4.3%.

For a dealer, SOFR is the starting line. The actual rate paid depends on the lender. Captive lenders (manufacturer-affiliated finance companies like Ford Motor Credit, GM Financial, or Toyota Motor Credit) typically charge SOFR plus 150 to 400 basis points, putting dealer rates in the 5.8% to 8.3% range. Non-captive bank lenders (commercial banks, credit unions, independent floor plan providers) often sit at SOFR plus 300 to 450 basis points, pushing effective rates to 7.3% to 8.1% or higher.

The Math Behind the Numbers

Floorplan interest expense is fundamentally simple arithmetic:

Interest Expense = Average Inventory Balance × Average Rate × Time

What makes the 2021-to-2024 swing so dramatic is that both the balance and the rate multiplied simultaneously. This is not an additive relationship — it is multiplicative.

Consider a simplified example for a single dealership:

That is the core mechanism. The same dealer who paid $41,000 in annual floorplan interest in 2021 now pays north of $900,000. The rate increased roughly 4.5x. The balance increased roughly 5x. And 4.5 times 5 is a 22x multiplier. That is why floorplan interest expense did not double or triple across the industry — it increased by multiples of ten.

What Changed: The Perfect Storm

Three forces converged to create this cost environment. All three are well-documented in the public filings.

1. Interest rates rose faster than any cycle in 40 years

The Fed raised the federal funds rate from near zero to over 5% between March 2022 and July 2023. Because floorplan debt is floating-rate (typically SOFR plus a spread, resetting daily or monthly), every rate hike passed through to dealer interest expense immediately. There was no lag. There was no fixed-rate protection for most dealers. Penske's 10-K explicitly attributes their 42.6% year-over-year increase to "higher applicable interest rates" on floorplan borrowings.

2. Inventory normalized and then kept climbing

After two years of scarcity, the semiconductor shortage eased in late 2022 and fully resolved through 2023. OEMs resumed full production. By the end of 2024, national new vehicle inventory hit 2.8 million units with 47 days' supply — the highest level since before the pandemic. Inventory that dealers once couldn't get enough of was now filling lots and costing money every day it sat there.

3. Vehicle prices stayed elevated

Even as supply recovered, average transaction prices remained elevated relative to pre-pandemic levels. A higher average invoice per vehicle means a higher floored dollar balance per unit. When you are paying 6–8% interest on $48,000 vehicles instead of 1.5% on $40,000 vehicles, the math compounds in both directions.

The combination is multiplicative: more units, at higher prices, at higher rates. Asbury's earnings disclosures call it out directly — their floorplan interest spike is driven by both the full-year impact of the Koons inventory and the rate environment.

What This Means for the Average Franchise Dealer

Public groups are useful as a proxy because they report exactly what private dealers never have to disclose. If Penske Automotive — with 350+ dealerships and presumably favorable lending terms — is paying $189.8 million in floorplan interest, what does a single-point franchise dealer face?

NADA data gives us the framing. In 2020, the average franchised dealership actually earned $108,395 on floor planning — a net credit, because OEM floorplan assistance exceeded interest expense when rates were low and inventory was scarce. By mid-2024, the average dealership was paying a net floorplan expense of $237 per new vehicle retailed. For a dealer retailing 100 new units per month, that is a swing of more than $390,000 annually — from a $108,000 profit center to a $284,000 cost.

Industry analysts at Mercer Capital documented this shift: in 2021 and early 2022, manufacturer floorplan credits (volume-based discounts designed to offset carrying costs) routinely exceeded interest expense, making floorplan financing a net positive on the income statement. That math broke when rates crossed 4% and inventory balances normalized. Now, for most dealers, credits cover only a fraction of the interest bill.

The Extrapolation

According to NADA, there are 16,957 franchised new-car dealerships in the United States. Current reporting puts average dealer floorplan expense at approximately $70,000 per month — an 800% increase since 2020. That works out to roughly $840,000 per store per year.

Multiply that across the entire franchise dealer population and you arrive at an industry-level number that is staggering:

16,957 dealers × $840,000/year = ~$14.2 billion in annual floorplan interest

That is $14 billion per year flowing from franchise dealer balance sheets to floorplan lenders. In 2021, the comparable figure was a fraction of that — many dealers were netting a profit on their floor plan, and total interest expense industry-wide was measured in the low single-digit billions.

The public groups in our analysis represent roughly 1,100 rooftops combined and collectively pay about $862 million. The other 15,800+ private franchise dealers — many of whom have less favorable lending terms than public companies with $20 billion in revenue — absorb the rest.

Why This Matters Now

There is a temptation to view this as a rate-cycle problem — wait for the Fed to cut, and it resolves itself. That framing misses three realities:

Rates are not going back to zero. The Fed's "dot plot" and market forward curves suggest rates settling in the 3.5–4.0% range as a new equilibrium. That still puts dealer effective rates at 5.5–8.0%. The era of free money for floor planning is over.

Inventory is not going back to scarcity. OEM production capacity has fully recovered. Barring another black-swan supply disruption, 2.5–3 million units of national inventory is the new baseline. Dealer lots will have cars on them. Those cars will carry interest.

The cost is structural, not cyclical. When both variables settle at their new levels, the industry is left with a permanent and material increase in the cost of doing business. A single-point dealer who once made $100,000 on their floor plan now loses $840,000 to it. That is a nearly million-dollar swing to the bottom line — every year, on a line item most dealers barely tracked five years ago.

Group 1 Automotive's approach offers one data point on mitigation: they entered interest rate swaps that lock their floorplan borrowing at a weighted average of 1.24%, effectively hedging against rate increases. Their net floorplan expense in recent quarters has been near zero. But that strategy requires scale, sophisticated treasury operations, and counterparty access that most single-point dealers lack.

For the majority of dealers, the response has to come from the other side of the equation: reducing the balance. That means turning inventory faster, identifying aged units earlier, and finding ways to move stock that is not selling in its current market. The math is simple: every vehicle that sits 30 days fewer on your lot at a 7% rate and a $48,000 invoice saves $276 in interest — and frees that capital for something that generates a return.

The 10-Ks tell the story. The question for every franchise dealer is whether they will see their own version of these numbers — and act on them — before the next filing cycle makes the picture worse.