>Dealerships hate carrying extra inventory because it costs money to finance the vehicles until they sell them.
Note that with interest rates having been really low, even negative in real term, an inventory was almost a good investment with relatively good returns (if you could get your hands on it). Now with rising interest rates and falling inflation, the cost of financing might become a burden again.
The bank rate to the dealership to carry its floorplan is much higher than the posted rates. Yes, being able to carry inventory during the pandemic is advantageous but otherwise dealerships work hard to not having a vehicle older than 180 days as they become undesirable to consumers.
>an inventory was almost a good investment with relatively good returns
This is a great point. Any dealer who had surplus inventory heading into summer 2020 did really well on their margins I bet. Of course, not something you want to base your business around...
Further, if a manufacturer were to stop paying for a portion of the floorplan interest when the vehicle is sold, then the effective interest rate may go up even more dramatically for lots with inventory over N days old.
Since Ford’s plan to prioritize direct sales has made news recently, it seems plausible they will seek some means to limit existing dealer inventory.
GM went through a dealer culling after the government bailout to strengthen the remaining stores. The Covid shock, it appears, may permanently cull inventory levels across the board and (optimistically) have the same end.
Note that with interest rates having been really low, even negative in real term, an inventory was almost a good investment with relatively good returns (if you could get your hands on it). Now with rising interest rates and falling inflation, the cost of financing might become a burden again.