Before diving into the benefits of floor plan finance, it’s crucial to understand the concept of financing dealer inventory. Floor plan financing is often compared to credit cards. In the simplest form, floor plan financing acts as a “credit card” made to purchase inventory to keep their dealership stocked up for consumers.
The floor plan finance company extends a line of credit to the car dealer. The dealer can then use the line of credit to purchase inventory.
So, how does floor plan finance benefit auto dealers and help them grow?
#1: More Inventory
Since floor planning relieves dealers from using their own cash to buy vehicles to stock their lots, dealers can purchase more and sometimes better inventory using their line of credit. With additional inventory, there will be more options for consumers, making sales more likely. Some dealer floor plan companies offer fewer purchasing limitations on inventory, making it easier to get the make and model of vehicle the dealer desires.
The increase in cash flow will give the dealer the flexibility to use cash for other dealership improvements, for example a service center. Enhancements like this can serve as another profit center for dealers that want to find ways to generate more revenue.
#2: Save Time
Running a dealership involves a substantial amount of time an effort, and a dealer’s time is valuable. Floor plan finance aims to save time.
For example, dealers buying with cash have to take additional steps and keep track of paperwork at auction to ensure their new inventory is properly purchased. With floor plan financing, dealers can simply bid and put the unit on their line of credit.
Since there is a constant stream of buying and selling cars, dealers carry the responsibility of managing titles for a variety of different vehicles. Some floor plan finance companies offer title services and innovative online and mobile account management tools. Dealers spend less time managing titles, which means less time spent at the DMV.
#3: Increase Profits
It’s commonly said that most dealers make money when they buy a vehicle, not when it gets sold. By using a floor plan financing, dealers will be able to see profit almost immediately after a unit is sold. If a $9,000 piece of inventory sells to a consumer for $11,000, dealers can pay off the original loan value plus any fees, all while having the flexibility to use dealership capital for other expenses.
Some floor plan financing providers, such as NextGear Capital, offer the ability to guide dealers into making good buys.
NextGear Capital dealers have access to Cox Automotive‘s Manheim Market Report and Kelley Blue Book valuations from the convenience of the Account Portal. Dealers can use these resources to reassure they are making good purchases.
Are you ready to start growing your business with floor plan finance options? Feel free to give us a try by applying for a line of credit , or letting us know if you have any questions or hesitations by contacting us, or reaching out to your region’s representative.