Use Your Auto Dealer Floor Plan to Your Advantage

Car dealers frequently develop and utilize systems and processes to maximize profitability. Dealer success can often be found when dealers find a system that works, and when dealers stay disciplined and stick to that system. An advantage of utilizing an auto dealer floor plan compared to cash or a regular bank loan is the added structure and rhythm it can add to a dealership’s operations.

An auto dealer floor plan is a line of credit formulated specifically for dealers to purchase automotive inventory. To simplify the concept a little more, auto dealer floor plan companies essentially allow dealers to borrow funds to purchase vehicles. The advantage of a floor plan line of credit is that dealers have purchasing power available at their fingertips without the need to utilize a dealership’s savings and cash on hand.

As vehicles are sold off of a dealer’s lot, dealers pay back the amount of the loan used to purchase that inventory. If it takes a while for a vehicle to sell, dealers only will owe a minimal fee after a contractually determined number of days. This arrangement lets dealerships use their cash on hand for other expenses, such as overhead and facility maintenance, and curb against vehicle depreciation.

Some dealers use that first floor plan payment on a unit to re-evaluate a vehicle’s selling strategy if the car hasn’t sold within the contracted number of days. Is the unit a bad buy for the dealer’s particular market? Was the vehicle delayed from being front-line ready by taking too much time to be reconditioned? Is the pricing strategy for the particular unit appropriate?

Dealers that take advantage of their utilize this strategy are able to transition from using a reactive strategy, to a proactive strategy to sell vehicles. Establishing proactive strategies and tactics such as using your auto dealer floor plan structure and developing an aged inventory exit strategy allows dealers to develop systems to maximize profitability.
If you are interested in learning more or getting an auto dealer floor plan, we’ll connect you with your local representative, and they’ll help you get started!

How Floor Plans for Car Dealers Make A Difference

Dealer and Nextgear rep looking at a tabletUsed car dealers hustle each and every day to acquire and sell vehicles. Frequently, dealers will purchase vehicles with the cash they have on hand. For many dealers, purchasing a car with cash seems like the best option. Buying inventory in cash allows a dealer to own a car in full and the vehicle won’t accumulate interest once the vehicle is purchased. Though buying a car with cash seems like a great deal and is a popular option, there are a few key advantages that floor plans for car dealers can offer over cash.

Floor planning can save time
A dealer’s time is valuable, and it’s safe to say that many dealers don’t necessarily want to spend their time taking care of small administrative tasks. However, when dealers purchase a vehicle with cash there will typically be extra paperwork and additional supervision needed to make sure payment for the vehicle is cleared, in addition to following up to ensure the title for a vehicle is handled properly.

Floor plans for car dealers will often offer dealers the convenience of their floor plan lender handling the whole transaction and sometimes, the additional title work required.

Floor plan financing can protect capital from depreciation
Purchasing vehicles with cash might mean that a dealer might be more susceptible to the effects of vehicle depreciation and aged inventory. Since a dealer’s cash is tied up in a piece of inventory, they don’t have many options until that vehicle sells. As long as the vehicle sits on the lot, the dealer will be limited when it comes to purchasing other inventory or paying for dealership operations.

Utilizing a floor plan lender to purchase vehicles means that a dealer doesn’t have to use their own cash to purchase a vehicle. Dealers are then able to make smaller payments over time to their floor plan lending provider.

An auto floor plan lets dealers use cash for other expenses
For car dealers, having an auto floor plan means that they are able to purchase inventory without using the capital the dealership currently has on hand. This allows dealers to use their cash to support the dealership’s operations, which can go towards hiring additional staff, marketing, or facility maintenance.

If your dealership had more capital on hand, what kind of changes would you make? Talk to your local representative and learn how floor plans for car dealers can make a difference at your dealership.

Merchandising Inventory Improves Speed to Market

Dealers looking to protect profit margins will often look to increase their overall speed to market. Often, posting vehicle listings quickly can be a vital part of improving the amount of time it takes for a dealer to turn their inventory. Every dealer understands that it will take some time to get a vehicle ready for customers. However, if dealers delay posting vehicle images and descriptions online, they have the potential to lose time and opportunity to show consumers the variety of vehicles coming soon to their dealership lots.

Customers Get an Early Look
On average, the time to get a vehicle to retail is approximately seven to 10 days. Considering all the individual steps that dealers need to account for, like transportation, reconditioning and manually posting vehicle details online, two weeks seems pretty reasonable. However, dealers that post images and vehicle descriptions soon after purchasing a vehicle at auction give customers the chance to get an early look at vehicles they might be interested in purchasing.

Potentially Fewer Costs
For each vehicle on a dealer’s lot, there’s an associated cost baked into each vehicle purchase. Even if a vehicle is getting transported or getting reconditioned it is accumulating holding costs. The longer a vehicle is on a dealer’s lot, the more it’s going to cost a dealer to hold on to that particular vehicle. The inverse is also true. If a vehicle doesn’t stay on a dealer’s lot long, the less it will cost a dealer to hold on to that vehicle.

If customers are able to get a chance to get an early look at inventory coming to dealership lots, they could potentially become motivated purchasers as soon as a vehicle is ready to be retailed. This helps dealers reduce the amount of time a vehicle sits on their lot, and consequently, the amount of money a dealer might spend to keep that vehicle on their lot.

Easy to Use Process
Cox Automotive’s Rapid Retail tool helps dealers quickly and simply post inventory online. Instead of dealers taking pictures of inventory and manually adding vehicle descriptions and images, dealers can utilize Rapid Retail to directly import vehicle data and photos from auction into HomeNet’s Inventory online tool, make any necessary edits and then post to a number of online inventory sites.

This process allows dealers to quickly and easily post multiple vehicles for sale within a few hours of purchasing them at auction. In addition, it can help minimize the amount of time an employee spends posting individual vehicle descriptions and images.

Accelerate your dealership’s time to market with Rapid Retail. Have additional questions? Click here for more details.

Maintaining Dealership Compliance

Staying on top of dealership federal and state regulations in a perpetually evolving legislative landscape can be difficult for dealerships. Ensuring your dealership is acting in accordance with current regulations takes steady and regular implementation and a near constant re-examination of current guidelines.* To help navigate the complexities of dealership regulations, Dealertrack recently published a dealer compliance guide that simply explains and highlights some areas where dealers often need to brush-up to ensure they are compliant.

Day-to-Day Compliance
Dealers use a variety of items to help consumers purchase a vehicle. This includes credit applications, credit reports, contracts and just typical dealership record-keeping. Each and every time a car is sold a dealer has to be cognizant of the different regulations that may apply to the different sections of a vehicle purchase.

Compliance Strategies
Regulations change, and it is often up to a dealer to ensure their business is compliant. One of the easiest ways to ensure dealership compliance is to implement useful tools and strategies. Dealertrack’s compliance guide offers a number of recommended strategies and practices.* Though these practices are not intended as legal analysis or legal advice, they may help dealers build their own compliance guidelines.

Compliance Implementation
A culture of dealership compliance is essential to protect your business. Are employees aware of compliance regulations? Is following correct procedure encouraged?

Implementing compliance guidelines and practices is essential. It can save a dealership time and money, and can help dealers avoid penalties, fines, consumer complaints and lawsuits. Interested in the Dealertrack compliance guide? Click here.

*This is not intended as a legal analysis, and we do not purport to provide any legal or regulatory advice. You should consult with your attorney for any legal, regulatory, or compliance questions you may have. Also note that any case descriptions provided are for illustrative purposes only. The compliance guide was created and is maintained by Dealertrack.

Dealership Wholesale Financing With NextGear Capital

Top 5 Floor Planning Mistakes by Dealers PhotoEfficient and simple dealership wholesale financing is an essential part of a wholesale dealer’s operation. Though independent wholesaling dealers have a completely different business model compared to auto dealers who specialize in selling to consumers, an independent wholesaling dealer has many of the same inventory financing needs as a retailing auto dealer.

For many wholesale dealers, speed is key. Turning inventory quickly means more revenue for a wholesale dealer. A wholesale dealer’s line of credit should be a help to turn inventory quickly, not a hindrance. Like retail dealers, a wholesaling dealer is looking for a wholesale financing provider with flexible terms, title management, excellent customer service and easy-to-use account management. With NextGear Capital, independent wholesaling dealers can access a number of benefits in addition to just a floor plan line of credit.

Fast, Simple Transactions
For wholesaling dealers that use a floor plan and sell directly to independent dealers, chances are that their customers also utilize a floor plan line of credit. NextGear Capital is one of the largest floor plan financing companies in the industry. If you are a independent wholesale dealer who uses a NextGear Capital line of credit, you may find that many of your customers also floor plan with NextGear Capital.

Instead of sending checks and waiting for them to clear, NextGear Capital can make the wholesale to independent dealer transaction simple. For wholesaling dealers, NextGear Capital can simply move the particular unit from an independent dealer’s floor plan to the wholesaling dealer’s line of credit, and deposit any difference into a wholesaling dealer’s financing account.

Title Management
Floor plan companies will often hold on to titles as a form of asset security. For wholesaling dealers, this means that NextGear Capital can primarily handle a number of tasks associated with managing titles, and many wholesale dealers might rarely have to deal with physical title management. Though titles for floor planned vehicles might not be immediately available to dealers, rest assured they’re available for viewing through a dealer’s account at any time.

Power of the Cox Automotive Network
Backed by the power of the Cox Automotive network, NextGear Capital customers have the unique availability to take advantage of the additional partnership between a number of Cox Automotive business units. For example, dealers can floor plan their transportation costs by taking advantage of NextGear Capital’s convenient transportation financing solution.

A comprehensive floor plan financing partner can be crucial to a wholesaling dealer’s success. Want to learn more about how a floor plan can help your wholesaling operations? Contact your local NextGear Capital representative here.

NextGear Capital Honors 2017 Auction Partner Award Winners at NAAA Used Car Week Convention

NextGear Capital, a Cox Automotive brand, presented the fifth annual Auction Partners Awards at the 2017 National Automobile Auction Association (NAAA) Used Car Week Convention in La Quinta, California. The Nov. 15 event honored independently owned auto auctions for their efforts to grow and support the industry and their communities.

“Independent auctions are at the heart of the independent dealer industry, and provide invaluable support and services to our clients,” said Randy Dohse, senior vice president of operations, NextGear Capital. “We deeply value those auction partners that demonstrate operational and remarketing excellence.”

This year, three auction partners were recognized with an Operational Excellence Award, reflecting their efficiency, sales retention, operational performance and responsiveness to NextGear Capital. In addition, a Remarketing Excellence Award was presented to the auction that demonstrated the highest percentage of sales recovered based on percentage of valuation of each vehicle and the best sales follow-up.

Congratulations to the 2017 Auction Partner Award winners:NextGear Capital Floor Plan• Operational Excellence Award: Dealers Auto Auction – Anchorage, Alaska• Operational Excellence Award: South Bay Auto Auction – Gardena, California
• Operational Excellence Award: DAA Northwest – Spokane, Washington• Remarketing Excellence Award: DAA Mobile – Mobile, Alabama

Using a Floor Plan Company as a Resource

Chris Tingler using account portal on his mobile device

A dealer using floor plan and talking to his repAuto dealers most frequently will rely on their floor plan company to provide financing for the inventory they purchase. While providing capital for dealers is the primary function of a floor plan lender, dealers will often forget that their floor plan financing company should be a valuable resource for industry insights.

Industry Expertise
Dealers need business partners that thoroughly understand the automotive business. Unlike a traditional lender, a floor plan company is an integral part of the automotive industry. They understand the needs and pain points of automotive dealers, and are up-to-date with industry trends and conditions.

NextGear Capital’s partnership with Cox Automotive means that our dealers are backed with insights from the entire Cox Automotive network. This expertise sourced from every corner of the automotive industry ensures that dealers get informed guidance when it comes to using their floor plan.

Local Market Knowledge
Many floor plan financing companies have local representatives or account executives located in a dealership’s community. These representatives are dedicated to your dealership’s growth and success, and have their hands on the pulse of the local automotive industry. Beyond just helping dealers utilize their floor plan lines of credit, these representatives can offer valuable insights and connect your dealership to potential resources that can help grow your business.

Dealer Resources
Dealers need more than just a floor plan line of credit to ensure dealership success. For the auto dealer looking to stay up-to-date on insights and trends, many floor plan companies offer a number of dealer resources. These resources can include case studies, webinars, videos and white papers that cover a variety of topics; including purchasing and selling inventory, sourcing inventory, and dealer business practices to keep in mind.

Utilizing a floor plan company as a resource for industry information ensures dealers are informed of essential information to help run and grow their businesses.
For those interested in the dealer resources provided by NextGear Capital, please click here.

Maximizing Profits on Auto Auction Purchases

dealer looking to profit off of auto auction purchasesToday’s dealers face an increasingly challenging process when it comes to purchasing used vehicles. Every vehicle that you find at auction or otherwise needs to be carefully considered and weighed, not just for your perceived profit margin, but also against your customer base, your current inventory, and its ROI.

It can be very difficult for dealers to earn the gross profits they saw in years past. The times of being able to confidently make a purchase without any extra thought are quite frankly, gone. So what can a dealer do?

There are three important factors to consider to acquire profitable inventory to help hedge against this risk.

#1: Know Your Needs First
Leave your gut at home. Make decisions at auction based on what you know your dealership needs. The most profitable dealerships know precisely what they want to buy before they spend times searching online or in the lanes. Specifically, you should have an idea about condition, equipment, mileage, and even color. And, of course, you need to know profit parameters for any vehicle based on your market.

#2: Know the Estimated Costs Before You Acquire
Again, gone are the days of just buying, or buying with your gut. Now, it all comes down to data and analysis. The most successful dealerships know if they can buy the car because they know what to expect in terms of profit. They use different tools to help factor in aspects such as reconditioning costs, the price of acquisition, and the cost of transportation. They also know whether or not they will buy a specific vehicle in cash or on their floor plan.

Again, this comes from having access to key tools. It takes using technology to gather information and learn point-by-point what you need in order to see the profits later.

#3: Ensure Your Dealership Manages Aged Inventory Well
Some dealers ignore aged inventory. They buy without knowing or having a process in place for managing the current aged inventory on their lot. Successful dealerships know that a vehicle eventually depreciates. The vehicles that haven’t sold quickly will either need to receive more attention in terms of online merchandising and reconditioning, or be retailed at an auto auction or sold through other channels.

Aging vehicles are a sore spot for many dealerships. Aging vehicles means that somewhere along the line, you missed the mark in making that purchase.

Focus your efforts on acquiring vehicles that will turn and profit quickly. Get rid of the aged inventory that puts a strain on dealership cash flow, and spend extra time – not money – on making the best auto auction purchases for your dealership.

Choosing a Dealership Floor Plan

Chris Tingler using account portal on his mobile device

Selecting a dealership floor plan provider can be an involved decision for an auto dealer. There are a number of different floor plan providers and banks that all can provide floor planning services. However, like any service, a dealer’s floor plan provider needs to be evaluated on how simple it is to access that extra capital and how those services will fit into a dealer’s existing business. Consider the following questions when selecting a floor plan lender that can not only provide adequate capital for inventory purchases, but can also save your dealership time and help improve dealership cash flow.

Does their technology meet the needs of your dealership?
Auto dealers are extremely busy, and it needs to be simple to get information about the current status of any vehicle on a dealer’s floor plan. Does your floor plan provider have the technology available to improve efficiency for your dealership? Can you view important reports about outstanding balances, inventory types and vehicle turn time? Dealers rely on the accurate information from the technology they use to run and grow their businesses. The ability to swiftly see a daily refresh of important metrics and figures mean that dealers don’t have to worry about time-consuming reporting and can quickly get back to business.

Dealers that choose NextGear Capital as their floor plan provider have access to the myNextGear platform. myNextGear allows dealers to have 24/7 account management access. A comprehensive dashboard gives dealers a high-level overview of the most important metrics for a dealership. Dealers can also securely view inventory, pending transactions, vehicle titles, submit new vehicles for financing, make and schedule payments and also view account analytics.

What’s their customer service like?
Every automotive dealer understands the importance of good customer service, and a business partner that understands your individual business needs. Are you able to easily get any issues resolved? Is there a representative in your area that can visit your dealership? A floor plan provider should be uniquely attuned to the needs and daily struggles of automotive dealers.

Auto dealers that select NextGear Capital have access to a company that is committed to service and customer-centric solutions. Average time to connect with a NextGear Capital team member on the phone is 10 seconds. In addition, dealers get a dedicated account manager to help dealers navigate their floor plan.

What other solutions are provided?
A dealer’s time is valuable. How will your floor plan provider integrate into current dealership processes? Does your dealership floor plan provider have additional services and features that can help save additional time? Though some dealers prefer to utilize a variety of independent vendors, it can be convenient to select a dealership floor plan provider that easily integrates with a network of other services.

The dealers that pick NextGear Capital as their floor plan financing provider have unparalleled access to the Cox Automotive network, and can take advantage of a number of time saving solutions. Solutions such as Rapid Pay allow dealers to floor non-auction purchases and overnight titles with a complementary FedEx waybill. Dealers can also floor plan their transportation due to a partnership with Ready Logistics.

Picking a dealership floor plan is not a simple decision. However, choosing a dealership floor plan provider that can successfully answer these questions is worthy of your dealership’s consideration.