NADA Inventory Management 2

Question 1

What is the primary purpose of a floor plan line of credit in automobile dealership operations?

Accepted Answer

To finance the purchase of vehicle inventory from manufacturers or auctions

Answer

To fund employee payroll and benefits

Answer

To cover dealership facility renovation costs

Answer

To provide working capital for fixed operations

Question 2

Floor plan interest expense for new vehicles typically begins accruing at what point?

Accepted Answer

When the vehicle is delivered to the dealership

Answer

When the vehicle is ordered from the factory

Answer

When the vehicle is first test-driven by a customer

Answer

When the vehicle reaches 30 days on the lot

Question 3

A dealership sells a new vehicle but fails to pay off the floor plan within the required curtailment period. What consequence does the dealer face?

Accepted Answer

The lender charges additional interest and may restrict credit availability

Answer

The manufacturer recalls the vehicle

Answer

The sale is voided by the lender

Answer

The vehicle's title is transferred back to the manufacturer

Question 4

When managing used vehicle inventory, which inventory turn target is generally considered optimal for a high-performing dealership?

Accepted Answer

8–12 turns per year

Answer

2–3 turns per year

Answer

4–6 turns per year

Answer

15–18 turns per year

Question 5

Which inventory metric compares a vehicle's retail asking price to similar vehicles in the local market?

Accepted Answer

Price-to-market ratio

Answer

Days supply

Answer

Market days supply

Answer

Retail turn rate

Question 6

A NADA consultant recommends that a dealership implement a stocking model based on 'market days supply.' What does market days supply measure?

Accepted Answer

The number of days similar vehicles are listed for sale in the local market before selling

Answer

How many days it takes to receive a factory order

Answer

The number of days a specific vehicle has been on the dealer's lot

Answer

The manufacturer's recommended stocking level by model

Question 7

In the context of new vehicle inventory, what does 'over-age' typically refer to?

Accepted Answer

New vehicles that have exceeded a defined holding period, typically 60–90 days

Answer

Vehicles with more than 10,000 demo miles

Answer

Vehicles no longer eligible for manufacturer incentives

Answer

Vehicles with outdated technology packages