3 Things Dealer Floor Planning Can Do For You

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Kathy Ward Dealer Advisory Board

Guy looking at cars that he has purchased using dealer floor planningDealer floor planning is one of the easiest ways for auto dealers to improve their business cash flow. Once approved for a floor plan, there are a number of ways dealers can see the immediate impact that a floor plan can make for their dealership.

Dealer floor planning allows you to choose how you want to grow your dealership
Floor plan financing opens up a number of options for a dealer to choose how they want to grow their business. Since a floor plan allows dealers to purchase extra inventory on a floor plan instead of using cash, this can lead to extra flexibility in a dealer’s budget. The cash a dealer has on hand can be used to pay for other expenses such as more staff, employee payroll, marketing or lot improvements.

Since dealers don’t have to worry quite as much about having enough cash on hand to purchase inventory, they are free to spend more time and money on their business growth goals.

Dealer floor planning gives dealers time back from administrative tasks
In a typical auction purchase, dealers will need to cut a check and persistently follow up with the auction to ensure individual checks have cleared and that the correct titles are received. This can take up a lot of a dealer’s time. With a floor plan, transactions and title transfers are taken care of seamlessly between the auction and floor planning company.

Dealer floor planning helps dealers to establish dealership discipline and routine
When a dealer uses cash or a business loan from a bank to purchase inventory, there isn’t always an incentive for dealers to sell vehicles or profit quickly on a sale. If dealers don’t sell inventory in a timely manner, their lots can quickly become overstocked and aged inventory becomes a looming problem. Dealers that use a floor plan have a number of contractually determined days until they have to pay their floor plan company back the original loan amount plus any accrued interest and fees. If a dealer hasn’t received a profitable bid on a vehicle due for payoff, that deadline can start a dealership’s inventory exit strategy.

Each inventory exit strategy will vary from dealer to dealer. Whether that plan includes wholesaling aged inventory or waiting for a better offer from a consumer, the floor plan deadline ensures that a dealer doesn’t let their investment depreciate.

What could your dealership do with more cash on hand? Could you hire more staff? Open another location? Purchase more inventory? Want to learn more about what dealer floor planning can do for your dealership? Find your local representative and we’ll get you connected.