dealer considering using a flooring financing plan to purchase vehiclesA flooring financing plan not only lets dealers stock their lots with more inventory, but it reduces time spent on administrative tasks, improves cash flow and provides opportunity for cash to work on the dealership’s behalf. Consider how a floor plan can assist in these primary areas.

Purchase More Inventory
A key reason dealers use a floor plan is to stock their lot with additional inventory. With thinning margins and fewer opportunities to make gross on vehicles, dealership profitability often relies on volume, meaning dealers frequently have to sell more vehicles faster for adjusted prices to make the same profits. When dealers stock more inventory, they create extra opportunities to draw in customers with different vehicle varieties, and consequently have better chances of making more sales.

With a floor plan, dealers have the enhanced ability to purchase inventory at needed volumes to help secure profitability.

Enhanced Cash Flow
It can be difficult for dealers to acquire the cars needed to maintain and sustain profitability, especially if they don’t have enough capital. Beyond just finding in-demand vehicles, the cash flow needed to purchase additional inventory can be surprising.

Let’s say a dealer has $50,000 in cash available for operations and inventory. If they set aside $10,000 to cover operations and emergencies, that only leaves $40,000 for inventory. Even buying more affordable inventory at $3000 per unit leaves dealers buying a maximum of 13 units, and less for higher priced vehicles.

The extra buying power afforded by a floor plan ensures that dealers can buy a reasonable amount of in-demand inventory without depleting dealership savings.

Get Time Back from Administrative Tasks
Dealers that use their savings to purchase inventory often have to handle a variety of administrative tasks along with the responsibility of bringing a new vehicle to their lot. For example, not only do dealers have to keep tabs on their checks clearing, but also have to handle the logistics and paperwork that come with vehicle titles.

Floor plan financing providers can essentially eliminate some of these organizational duties. It’s simple to buy a vehicle at auction and put it on a floor plan. Additionally, auctions will often work directly with the floor plan provider to ensure titles are handled properly.

Still unsure about getting a floor plan? Connect with one of our representatives to learn more about how a NextGear Capital line of credit could enhance your cash flow and current operations.