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

A floor plan line of credit is a revolving loan specifically used to finance vehicle inventory, with the vehicles themselves serving as collateral.

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

Floor plan interest begins when the vehicle is physically delivered to the dealership and the lender pays the manufacturer on the dealer's behalf.

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

Failing to pay off floor plan after a sale triggers additional interest (curtailment fees) and can result in reduced credit limits or suspension of the floor plan line.

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

High-performing used vehicle departments typically achieve 8–12 turns per year (roughly every 30–45 days), balancing gross profit with inventory velocity.

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

Price-to-market ratio expresses a vehicle's asking price as a percentage of the average retail price for comparable vehicles in the local market.

NADA - Certified National Automobile Dealers Association Consultant Practice Test

NADA - Certified National Automobile Dealers Association Consultant Practice Test

NADA Inventory Management 2