Holding cost calculation
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Transcript of Holding cost calculation
![Page 1: Holding cost calculation](https://reader035.fdocuments.us/reader035/viewer/2022081502/58ed72e51a28abb57a8b45c1/html5/thumbnails/1.jpg)
HOLDING COST CALCULATION
![Page 2: Holding cost calculation](https://reader035.fdocuments.us/reader035/viewer/2022081502/58ed72e51a28abb57a8b45c1/html5/thumbnails/2.jpg)
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
![Page 3: Holding cost calculation](https://reader035.fdocuments.us/reader035/viewer/2022081502/58ed72e51a28abb57a8b45c1/html5/thumbnails/3.jpg)
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
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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
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FORMULATOTAL CARRYING COST
FINANCE COSTDEPRECIATIONOPPORTUNITY COST= +
+
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LEARN MORE AT
http://www.simplerecon.com/Recon-Blog/Carrying-Cost-for-used-car-at-the-dealership.htm5
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SAVINGS CALCULATOR
http://www.simplerecon.com/Savings-Calculator.htm5