Should I sell down my used car lot’s inventory before selling the business?

There is no single right level of stock to carry into a sale. A lot is judged partly on what is on it and partly on how fast it turns over. The choice affects what you pay your lender at closing, what a buyer can see and how the closing count is handled. Think it through with your advisors before you start changing the lot.

What running stock down does

Selling cars without replacing them reduces what is owing on your floor plan line and leaves less to count on closing day. It can also make the lot look thin, and a buyer may wonder whether sales have slowed or you have stopped buying. If you take this route, tell the buyer why, so the gap is not misread.

What a full lot does

A well-stocked lot shows the buyer how you buy, recondition and sell, and it keeps customers coming in while the sale is pending. The cost is a larger floor plan balance to settle and more cars to value on closing day. Older units are the main concern, so look honestly at which cars have been on the lot longest.

Agreeing an inventory schedule

Many sellers and buyers write an inventory schedule into the agreement. It lists the cars included, how each is valued and who pays out the lender on which units. Ask your lawyer whether the buyer takes the cars, the floor plan line or both. How floor plan financing works when you buy a dealership shows the buyer’s side of the same question.

Who to involve

Talk to your floor plan lender about how it expects to be paid out, and to your accountant about how stock is recorded. Your lawyer can draft the schedule. The decision remains yours, based on what each of them tells you about your own lot.