How Does A Dealer Floor Plan Work

Floor plan finance companies are uniquely attuned to the needs of auto dealers.

How does a dealer floor plan work. The dealer then repays that debt as they sell their inventory and borrows against the line of credit to add new inventory. In short dealer floor plan financing allows dealers to borrow against retail inventory. The concept of a dealer floor plan is pretty simple.

Contrary to common perceptions most car dealers do not pay cash for the. Retail floor planning also referred to as floorplanning or inventory financing is a type of short term loan used by retailers to purchase high cost inventory such as automobiles these loans are often secured by the inventory purchased as collateral. Using cash or a bank line of credit to purchase inventory can work for some car dealers but many floor plan financing companies offer a variety of dealer specific benefits.

Floor planning is commonly used in new and used car dealerships. However in the context of daily dealer activities how does a dealer floor plan work. For example a dealer might be able to borrow 10 million over the year to purchase 300.

A dealer floor plan is a loan for your vehicle inventory. How does floor plan financing work specifically to benefit auto dealers. What you don t realize is that like most new car dealers a floor plan was used to finance the cars.

Let s say you make a profit of 3 000 per car sold. If your holding cost per day per unit is 44 63 and your turn time is 60 days you will spend 2677 of your profit holding on to a non selling car. These floor plan finance formulas incorporated with your turn time can help to make or break your dealership s profitability.

Floor plan lenders include local and regional banks large national banks and financing companies owned by the manufacturing companies like toyota financial or ford credit. A floor planning lender gives a dealer a line of credit to purchase inventory. For example automobile dealerships utilize floor plan financing to run their businesses.