Chris Tingler is a dealer who uses an automotive floor planLet’s talk floor plans… and no, not the kind of floor plan an interior designer would use. Automotive floor plans are designed with independent auto dealers in mind. In this article you’ll learn the basics of floor plan financing and how it can work for your dealership.

What are automotive floor plans?

The terms “floor plan” and “floor plan financing” get thrown around frequently in dealership and auction circles and are often a preferred form of financing for independent dealers. But what are they? Automotive floor plans act similarly to a credit card. A floor plan financing company extends a line of credit to an auto dealer. Dealers can then use their floor plan line of credit to purchase inventory from auctions and other inventory sources. If a dealer purchases a car on a floor plan, takes it back to their lot and it doesn’t sell within a contractually determined number of days, dealers are charged a small fee. As a dealer sells their inventory, they pay back the original loan.

How are floor plans different than using cash?

If you’re a dealer who has shied away from using floor plan financing because you take pride in being cash-only, you could be missing out on some of the great benefits floor planning has to offer. Using floor plan financing doesn’t always mean you need financial help.

Automotive floor plans are also a great option for the dealer who is just starting out. With a floor plan, you can stock your lot with vehicles without having all your dealership cash tied up in inventory.

With an automotive floor plan, the initial investment needed to buy a particular unit is a fraction of the vehicle’s actual purchase price. As soon as that vehicle sells to a customer, floor planning dealers can see their profits immediately and pay back the initial value of the loan plus interest and fees.

Trying to convert cars back to cash is a hassle and a drain on you with investments in time, travel and paperwork. Floor planning can help you finance nearly any type of remarketed inventory, freeing up cash flow for the things that make the most impact on your business. You could use that cash to open a service center, make lot improvements or advertise.

Dealers that use automotive floor plans to purchase inventory have access to products and resources that can alleviate some time and effort and improve efficiencies with administrative tasks. Floor planning dealers can purchase inventory with the confidence that the auction and seller will be properly compensated. In addition, title management is handled on the dealer’s behalf, saving time and effort for dealers.

How do I get started?

It’s easy to get started with a dealer floor plan provider. In most cases you can apply for funding without leaving your dealership. Most companies that specialize in financing for independent dealers, like NextGear Capital, have online applications. The company will review the application and decide if you qualify for a line of credit based on the information provided.

At NextGear Capital, our purpose is to provide financing for independent dealers. To get the buying power and resources you need, contact us.