HOLDING COST CALCULATION

FINANCE COST

• DIVIDE YOUR MONTHLY FINANCE COST BY NUMBER OF FINANCED CARS IN INVENTORY AND NUMBER OF DAYS IN THAT MONTH (OR YOU CAN USE 30 AS A GENERAL NUMBER)

• IF YOU DON’T FINANCE, USE THE RISK FREE RATE + 1% TIMES COST OF CARS IN INVENTORY

DEPRECIATION

• USE PRICING DETAILS FROM BLACK BOOK TO SEE HOW THE PRICE OF YOUR INVENTORY DEPRECIATES

• USE PRICING TRENDS FROM YOUR AUCTION WEBSITE TO SEE THE POTENTIAL DEPRECIATION OF INVENTORY IF YOU DO NOT SELL IT QUICKLY

OPPORTUNITY COST

• EVERY DAY THAT YOU DON’T SELL THAT CAR, YOU ARE LOSING THE OPPORTUNITY TO BUY ANOTHER CAR AND TRY TO SELL THAT CAR

• THIS IS COMMONLY KNOWN AS INVENTORY TURN. SO THE LONGER YOU TAKE TO TURN INVENTORY, THE HIGHER YOUR TURN TIME WILL BE

FORMULATOTAL CARRYING COST

FINANCE COSTDEPRECIATIONOPPORTUNITY COST= +

+

LEARN MORE AT

http://www.simplerecon.com/Recon-Blog/Carrying-Cost-for-used-car-at-the-dealership.htm5

SAVINGS CALCULATOR

http://www.simplerecon.com/Savings-Calculator.htm5