The Economics of a Dealer-to-Dealer Swap: What Both Sides Need to See

The Most Efficient Capital Recovery Tool Nobody Uses

Every franchise dealer knows the problem: a vehicle lands on the lot, the clock starts, and floorplan interest begins compounding from day one. By the time a unit crosses 90 days, it has already accumulated hundreds or thousands of dollars in carrying costs, and it is still sitting there.

The conventional playbook is to mark it down and push it out. Slash the price, take the front-end gross hit, move the metal. But that playbook has a flaw: the vehicle is not inherently unsaleable. It is unsaleable in that specific market.

A 2025 Chevrolet Equinox EV that cannot move at a suburban Midwest store might be exactly what a metro dealer 40 miles away needs, where EV demand is three times the regional average. The vehicle does not have a demand problem. It has a location problem.

Dealer-to-dealer swaps solve the location problem without the gross erosion. No auction fees. No wholesale loss. No reconditioning write-downs. Two dealers exchange aged units for vehicles their respective markets actually want, and both walk away with fresh inventory and a reset clock. It is the most capital-efficient recovery mechanism available to franchise dealers.

Yet across 1,674 dealerships and 302,152 vehicles we track, the overwhelming majority of aged inventory -- 91,897 units past 90 days -- sits without a swap pathway. The reason is not that swaps do not work. The reason is that neither dealer can see the math that makes the swap obvious.

The Anatomy of a Swap: What Both Sides Need

A dealer-to-dealer swap is mechanically simple. Two same-brand franchise dealers identify vehicles that would perform better on the other's lot. They agree on terms, transport the vehicles, and each gets a unit with stronger local demand signals. The floorplan transfers, the clock resets, and both dealers emerge with inventory their customers are actually searching for.

The complexity is not in the execution. It is in the decision. For a swap to happen, both dealers need answers to three questions simultaneously:

1. What is this costing me? -- Not the vague sense that aged inventory is bad, but the exact carrying cost per day, the projected cost at curtailment, and the total capital exposure.
2. Is this a fair exchange? -- An equivalency score that accounts for MSRP parity, age differential, brand compliance, and geographic fit. No dealer is swapping an Odyssey for a Civic Si.
3. What do I gain? -- The capital recovery path: how much carrying cost is avoided, how much frozen capital is freed, and what the demand signal looks like at the destination.

Today, none of this information exists in a format that both dealers can share. Your DMS shows you what you paid and what you owe. It says nothing about the carrying cost trajectory of the vehicle, the curtailment timeline, or whether the dealer 40 miles away has a market that would absorb the unit in 15 days.

Worked Example: The Equinox EV and the Silverado

The math tells the story better than any pitch deck. Consider two GM dealers within 40 miles of each other, both sitting on aged inventory, both hemorrhaging capital -- and both holding exactly what the other dealer needs.

Dealer A is a suburban store in a market where EV adoption is flat. Their Equinox EV has been sitting 145 days. The GM Financial curtailment gate hits at day 180, and the math is brutal: $44,160 in floorplan principal, compounding at $8.59 per day. They have already burned $1,245 in interest with 35 days until the gate slams shut -- at which point they face $4,296 in combined interest, extension fees, forced principal paydown, and admin costs.

Dealer B is 40 miles away in a metro area where EV demand is strong, but their Silverado 1500 has been aging at $9.30 per day for 130 days. Trucks are not moving in their urban footprint. They are on pace for $4,644 in total costs at their curtailment gate.

The punchline: Dealer A's market moves trucks. Dealer B's market moves EVs. Both are bleeding capital on inventory their respective customers do not want.

Dealer A receives a Silverado 1500 -- a vehicle their truck-buying market has been searching for. Dealer B receives an Equinox EV that fits their metro EV demand profile. Both vehicles get a fresh start in a market that wants them. The combined curtailment cost avoidance is $8,592. The transport cost at 40 miles is roughly $400 to $600. That is a 17:1 ratio of savings to friction.

But here is the critical point: this swap only happens if both dealers can see the numbers simultaneously. Dealer A cannot call Dealer B and say "I've got an Equinox, you want it?" without both of them understanding the carrying cost exposure, the equivalency math, and the capital recovery trajectory. Without that shared visibility, it is just two strangers guessing whether the trade is fair.

The Three Things Both Dealers Need to See

1. Carrying cost transparency

Every vehicle on floorplan has a daily burn rate. It is not complicated math, but it is math that almost no dealer performs on a per-unit basis:

This per-unit daily cost is what determines whether a swap is worth the transport expense. If a vehicle is burning $9.30 per day and you can swap it for a vehicle that will sell in 20 days, you are not just avoiding the curtailment cliff -- you are converting a capital drain into revenue. The monthly savings formula makes this explicit: the difference in daily carrying cost between what you are holding and what you would receive, multiplied by 30, gives you the monthly capital impact of the swap.

2. Equivalency scoring

Fair trades require a common language. Two dealers looking at a potential swap need an objective score that tells them whether the exchange is balanced. This is what the Swap Relevance Score -- SRS -- is built for.

Brand match is not a scoring factor -- it is a gate. OEM franchise rules require same-brand swaps. A Chevrolet can only swap with a Chevrolet. If the brands do not match, the swap never surfaces. Every candidate that makes it to scoring has already cleared that requirement. The exception is multi-brand rooftops under the same captive -- a CJDR dealer can swap across Chrysler, Jeep, Dodge, and Ram, and a GM dealer can move between Chevrolet, GMC, Buick, and Cadillac, because the franchise agreement and captive lender are shared.

With brand match as a prerequisite filter, the four-factor SRS scoring system weights the dimensions that actually determine whether a swap closes. Price Equivalency and Age Differential carry 25% each -- they determine whether the trade is fair and whether both sides have urgency. Geographic Proximity at 20% governs transport economics: past a certain distance, the freight kills the deal. Demand Signal at 15% confirms the receiving market wants the incoming vehicle. Capital Impact at 15% measures how much carrying cost relief each side gains -- a swap where both units are deep past curtailment is more mutually beneficial than one where only one side is bleeding.

In the Equinox/Silverado example, the SRS score is high across every dimension: same brand, 40 miles apart, both deep in aging, tight MSRP spread, and complementary demand signals. When both dealers see their own, the negotiation collapses from "Is this fair?" to "When do we schedule transport?"

3. Capital recovery path

The final piece is showing each dealer what happens after the swap. Not just "you avoid curtailment" but the full capital recovery trajectory: the carrying cost saved, the capital freed from floorplan principal, and the projected days-to-sale in the receiving market.

For Dealer A, receiving the Silverado means moving from a vehicle burning $8.59/day with 35 days to curtailment into a truck their market actively demands. If their average truck turn is 28 days, the Silverado is gone before the original Equinox would have even hit its curtailment gate.

For Dealer B, the Equinox EV lands in a metro market where EV search volume is 3x the suburban average. The carrying cost clock resets, and the vehicle enters a demand environment where it competes rather than languishes.

The capital freed is the invoice value that would otherwise be locked in a depreciating asset: $92,000 in combined floorplan principal between the two vehicles, redeployed into inventory that turns.

Why Swaps Fail Today

If swaps are so efficient, why are they rare? Because the infrastructure does not exist. Every prerequisite for a successful swap -- cost visibility, equivalency scoring, capital impact quantification, and dealer discovery -- is either absent or locked inside systems that do not talk to each other.

What changes when both dealers have the data is straightforward: the conversation shifts from "Do you want to swap?" to "Here is what we both save." The carrying cost math eliminates ambiguity. The equivalency score eliminates perceived unfairness. The capital recovery path eliminates uncertainty about the outcome. When all three are visible to both sides, the swap decision becomes arithmetic, not negotiation.

From Matching to Readiness: The Four-Stage Check

Finding a match is only the first step. Before a swap proposal reaches either dealer, it passes through a four-stage readiness pipeline that validates the deal from every angle:

The Swap Simulator runs the full what-if analysis: what does each dealer's carrying cost trajectory look like with and without the swap? It models the forward projection at 30, 60, and 90 days, including curtailment waterfalls. The Confidence Engine then assigns a 0-100 confidence score based on data quality, SRS strength, capital impact magnitude, and configuration completeness. If the confidence score is too low, the swap is flagged -- and in some cases, the engine generates a "Skip It" anti-recommendation, explicitly telling the dealer not to pursue the trade.

The Seasonal Demand layer checks whether the receiving market's demand for the incoming vehicle is trending up or down based on 12-month velocity curves. A swap that looks good on paper but delivers an EV to a market where EV demand drops 40% in winter gets penalized. Finally, the Swap Predictor estimates the probability of acceptance based on historical patterns and dealer behavior, routing only the highest-probability proposals.

The output is a binary: ready or not ready, with a list of specific blockers if the answer is no. No ambiguity, no "maybe." Either the swap passes all four checks and both dealers see a high-confidence proposal, or it does not surface at all.

The Network Effect

Individual swaps save individual dealers money. But the real leverage is in the network.

Consider the scale of the opportunity by brand. Across the portion of the franchise network we monitor, Ford has 12,608 units past 90 days. That is 12,608 vehicles burning capital for their current owners that could be performing in a different market. Chevrolet adds 11,918. Hyundai adds 11,056. Kia adds 7,341. Each of these represents a pool of potential swaps within a single franchise brand -- and that is just the slice of the network we can see today.

When Perry's matching engine has processed 7,173 swap proposals from this inventory base, the pattern is clear: the matches exist. The capital savings are real. The question has never been whether dealer-to-dealer swaps work. The question is whether both sides can see the economics simultaneously.

The answer to that question is what changes everything.

The swap does not need a salesperson. It needs a spreadsheet that both sides can read.