Floorplan Interest and Depreciation: A Year-End Review for Dealership Owners 

Year-end planning gives dealership owners an important opportunity to look beyond sales results and focus on two areas that can have a meaningful impact on financial performance: floorplan interest and depreciation. Both can affect cash flow, taxable income, and how leadership evaluates the cost of carrying inventory and investing in the business. 

This review may be especially important in a changing dealer market. Recent dealer forecast information pointed to softer new-vehicle sales, rising inventory, increased days’ supply, and pressure on floor-plan interest and working capital. When vehicles remain on the lot longer, interest costs can become more visible, and the timing of asset purchases can matter more. 

Floorplan Interest Deserves More Than a Line-Item Review 

Floorplan interest is often treated as a cost of doing business, but high-performing dealerships tend to examine it more closely. Owners and managers should understand what is driving the cost, including inventory age, vehicle mix, rate changes, manufacturer programs, and sales pace. 

For federal tax purposes, floor plan financing interest has specific treatment under the business interest expense limitation rules. The Section 163(j) interest expense limitation generally considers business interest income, 30% of adjusted taxable income, and floor plan financing interest expense when determining deductible business interest. Because these rules can be technical, dealers should make sure floorplan interest is properly tracked and discussed with their tax advisor before year-end. 

Depreciation Planning Should Match the Business Plan 

Depreciation is another area where timing and documentation matter. Dealerships often invest in shop equipment, technology, furniture, facility improvements, loaner vehicles, and other business assets. These purchases can affect both financial statements and tax planning. 

The IRS has issued guidance on the permanent 100% additional first-year depreciation deduction for eligible depreciable property acquired after January 19, 2025. That may create planning opportunities, but it should not drive purchases on its own. A tax deduction is only one part of the decision. The asset should still support the dealership’s operations, customer experience, efficiency, or long-term growth plans. 

What Owners Should Review Before Year-End 

A practical year-end review should bring together the owner, general manager, controller, and CPA. The group should review inventory aging, floorplan balances, interest expense trends, planned asset purchases, depreciation schedules, placed-in-service dates, and supporting documentation. 

CPAs may also look for items that are easy to miss during routine reviews, including assets that were sold or retired but remain on the books, improvements that may need to be classified differently, inconsistent capitalization practices, or purchases that were recorded to repairs and maintenance but may require closer review. 

The goal is not to create more complexity. It is to help dealership leaders make better decisions with cleaner information. By reviewing floorplan interest and depreciation before year-end, owners can better understand cash flow, manage tax planning conversations, and enter the next year with greater financial clarity. 

Brady Martz works with dealership clients to review financial reporting, tax planning considerations, and the accounting details that support better year-end decisions.