The Basics of an Auto Floor Plan

Dealer talks about his auto floor planIt’s easy for a car dealer to stock up their lots if they have enough money on hand to buy inventory. One of the most common ways for a dealer to have enough money on hand to purchase inventory is to use an auto floor plan.

Getting a Floor Plan
In order to qualify to use an auto floor plan, a dealer needs to have credit. Specifically, a history of using credit and paying down debt. Floor plan lenders want to see what a dealer’s credit history is like. Bad credit and some marks on a credit history won’t always prevent an individual from using a floor plan, but it will likely limit the amount of capital a lender is willing to give to a particular dealer. Dealers that manage their floor plan correctly and over time, show they are capable of floor planning responsibly, will likely be able to increase their loan amount.

Using a Floor Plan
Many auction locations accept a number of auto floor plan companies as a payment option. This means that at auction, a dealer only really has to worry about one thing: buying inventory. With a floor plan, dealers don’t have to worry for the most part about handling back-end operations and details. All a dealer will have to do is bid, and take blocked tickets to the correct department to complete their purchase.

Growing Dealership Business
Auto floor plans ensure that a dealer has the capital needed to purchase inventory, and frees up dealership cash to pay for other expenses. Floor plans ensure cash isn’t eaten up by depreciation, and dealers don’t have to spend extra time at auction or waiting for checks to clear.

Using a floor plan gives dealers the flexibility to do what they do best, delivering excellent customer service and putting consumers in the vehicles they want and need.

Tips to Quickly Turn Dealer Inventory

cars in a lot poised to quickly turn dealer inventoryAfter a purchase, it can take a significant amount of time for a vehicle to become customer-ready. The increased speed of getting a vehicle to market is important. There is a clear correlation between how quickly inventory is merchandised and online to how fast that inventory moves. Dealers have a better chance of improving overall profits the faster that inventory moves. So what can a dealer do to get inventory to their lots faster and turn inventory quickly?

One of the easiest ways to turn dealer inventory faster is to know what types of vehicles sell well in an individual dealer’s market. Evaluate the types of vehicles available at auction. Do those makes and models sell well on your dealership’s lot? Use data from Account Portal and the vAuto Stockwave tool to find which vehicles will sell well on your lot.

Floor planning can speed up the buying process and help turn dealer inventory quickly. Not only does the process move quicker since dealers do not have to go through the steps of writing a check and waiting for it to clear, but they are granted extra flexibility that allows them to make quicker buying decisions, knowing that they have a line of credit to fall back on if their inventory costs are a little higher than expected.

After acquiring a vehicle, there are a number of other steps that dealers can take in an effort to get the vehicle on their lots faster.

One tactic is to get vehicles featured on digital dealership platforms before leaving the auction. The sooner a dealer can get a vehicle online, the faster a potential customer can see and potentially buy the vehicle. Even if a potential vehicle needs to be reconditioned, take a few photos that you can post while the vehicle is headed to your lot.

If it isn’t possible to post anything online before leaving the auction, do detailing work before reconditioning to get images online sooner.

Dealers will also need to evaluate their transportation models to ensure they are using the most efficient means to get vehicles from point “A” to point “B.” Manheim customers can look at solutions such as Ready Logistics to move cars quickly and efficiently. As a bonus, NextGear Capital customers have the added ability to floor plan transportation costs.

Getting a car ready for purchase on a dealership lot can take some time. However, taking steps to acquire and turn dealer inventory quickly is an excellent way for dealers to protect dealership profitability.

Small Changes to Increase Dealership Sales

The sale has been made. Your customer is pleased with their vehicle purchase. But does your dealership’s relationship with the customer end after the purchase? In an ideal world, that one customer would hopefully refer their friends to purchase vehicles at your dealership, would come back to get their vehicle serviced for maintenance and would purchase their next car at your dealership. However, according to a study from Autotrader, only 46 percent of new car buyers return to a dealership where they have had prior experience, and only 30 percent of used car buyers return to a dealership where they have had prior experience. That means approximately 70 percent of customers that purchase from your dealership don’t return. What can car dealers do to encourage those customers to re-visit?

Excellent Customer Service
Though it might seem like a simple concept, excellent customer service is one way to ensure that customers have a positive experience at your dealership. Use your dealership’s website and digital presence to let consumers to look at inventory and complete any available purchasing activities. If and when customers visit your dealership, let them leverage their knowledge they’ve obtained prior to their dealership visit and let them lead the conversation. In addition, minimizing the number of staff members a customer has to meet with can help to increase customer satisfaction.

Don’t know where your dealership could improve its customer service efforts? Encourage customers to complete a survey with questions about their experience. Look for consistent trends, and make any necessary operational changes based on those survey results.

Offer Incentives
One simple way to encourage a customer to revisit is to offer some incentives. For example, a dealer could give customers two free oil changes and tire rotations after every vehicle purchase. This incentive gives a customer a reason to return, and it gives your dealership another touch point in addition to the opportunity to show off your dealership’s excellent customer service.

When dealers give their customers a great experience and a reason to return, those customers are sure to re-visit, and will hopefully re-purchase.

Canstruction 2017

NextGear Capital team members recently participated in their third annual Drive Away Hunger campaign, Cox Automotive’s annual food drive benefiting Feeding America. Feeding America is a nonprofit, nationwide network for more than 200 food banks that feed more than 46 million people and serve 4 billion meals through food pantries, soup kitchens, shelters, and other community-based agencies annually. One of NextGear Capital’s closest community partners is Gleaners Food Bank of Indiana, a food bank that is also a part of the Feeding America network.

Each year, NextGear Capital sets a lofty goal for its Drive Away Hunger campaign. The goal this year was to donate 14,000 pounds – nearly two times the 2015 goal. Team members in the corporate office, those spread out across the nation in the field, and NextGear Capital’s Canada office all participated in the two week long food drive. This competition among departments encourages team members to bring in non-perishable goods that they can use to build a structure and then donate to their local food bank.

The pinnacle event of the drive is CANstruction, which pits departments against each other to build the ultimate structure out of the food they collected. 11 teams across Canada and the United States built creative and innovative arrangements in 2017. From a fire hydrant that “extinguished hunger” to a baseball field that “knocked hunger out of the park”, teams rallied together to fight for the top spot.

Judge’s Choice: The Lending Department’s team, Knock Hunger Out of the Park, CANstructed Wrigley Field complete with a baseball diamond, score board, and decorations that resembled fireworks! The team also secured third place out of all Cox Automotive teams.

Most Wanted: Records and the Shared Service Center team, the Crunch Berries, were awarded the Most Wanted trophy. Using the largest variety of Gleaner’s most needed items, the team CANstructed a ship completed with a sail made of (old and void) car titles!

People’s Choice: Sticking to their roots, Customer Experience’s team, CANtabulous, CANstructed a life size rendering of the state of Indiana including the White River!

With corporate, field, and international team members working together, NextGear Capital was able to donate a total of 14,105 lbs. to food pantries across the continent! The corporate office was able to raise over 11,000 lbs., field team members raised over 2,000 lbs., the Canada office raised almost 500 lbs., and team members donated $1,750 in cash donations, which equates to approximately 5,250 meals.

NextGear Capital strives to make an impact in the communities where our team members live and work. Commitment to Community is not only a Cox Automotive value, but a strong core value for NextGear Capital as well. With over 240 volunteer hours logged for this campaign alone, it truly speaks to NextGear Capital’s commitment to serving the local community.

If you are looking for more ways to get involved with Gleaners Food Bank of Indiana, click here to visit their website and explore more volunteer opportunities.

 

Missing Out On Car Dealership Sales?

Car dealership sales person showing a customer a vehicleYou’ve got a customer on the lot and you spend part of your evening showing them different vehicles. They seem interested, but then they leave. Why is your dealership missing out on these car dealership sales?

Vehicle buyers move through a complex shopping process. Some buyers want to make an educated buying decision after looking at a wide variety of vehicles on your lot. Other buyers begin with an idea of what kind of vehicle they want, and complete complementary research online.

Approximately 40 percent of buyers like to shop around before making a purchase. This small detail is important because it can indicate that many buyers are not going to buy from you simply because they have not looked around enough yet. However, this can also provide a measure to gauge interest, especially if your sales professional asks, “Have you looked at any other dealerships yet?” Depending on your customer’s answer, you can gauge just how ready they are to buy.

One of the biggest reasons customers also don’t purchase is because the vehicle they want isn’t on your lot. According to the 2017 Car Buyer Journey Study from Cox Automotive, 38% of buyers don’t make a purchase because the vehicle they want isn’t on the lot. Keeping dealership inventory updated online can be an easy way to ensure potential customers know what exactly is on your lot at any given time. However, beyond that, there typically isn’t a lot a dealer can do in this situation beyond asking the customer if they would like the dealership to acquire the vehicle they are looking for.

Unfortunately, about 25 percent of all visitors to your lot are just simply not ready to make a decision. Was there a particular reason your customer wasn’t ready to make a decision. Ask why they weren’t ready to make a purchase, and if you should follow up with them at a later date. What kind of follow-up efforts are in place for your dealership?

Though customers might not be ready to purchase when they first visit your dealership lot, ensuring they have a good experience can mean a purchase when they return to your lot.

2017 GIADA Convention and Expo Wrap-Up

Booths at the GIADA Convention and ExpoAutomotive industry conferences are an excellent way to stay up-to-date on the latest auto industry news. In addition, they are a great way to get introduced to dealer partners and network with other dealers that might share similar experiences. Independent dealers in Georgia recently had the opportunity to attend the Georgia Independent Automobile Dealers Association’s annual conference.

Some dealers are required by individual states to complete continuing education courses to receive their dealer license renewal credits. For Georgia based car dealers, one of the easiest ways to earn state-mandated continuing education credits is to attend an association event. The Georgia Independent Automobile Dealers Association (GIADA) is one of the country’s largest independent dealer associations. This year, the GIADA hosted their annual “Rev Up Your Education” convention.

One of the many great benefits that dealers can receive from the convention is the ability to access the most up-to-date trends and information from thought leaders throughout the entire automotive industry. Workshops and sessions hosted by these industry thought leaders covered a variety of topics, including Cox Automotive’s own Majd Saboura, who discussed how dealers can apply real-time market insights to redefine the evaluation of potential vehicles for purchase.

Some other conference workshop highlights included sessions that covered topics such as legal compliance, updates to the Georgia state title process, wholesale vehicle acquisition, digital retailing as well as other workshops that included insights on small process changes that could help lead dealers to a quicker return on investment.

The conference wasn’t just all work and no play. There are a number of fun entertainment opportunities available to network with other dealers. This year, over 580 car dealers attended GIADA’s annual conference. With such a large number of dealers in one place, dealers had the opportunity to meet and discuss common struggles, challenges, exciting wins and best practices.

If you are a Georgia dealer (or close to that region) and you didn’t have the chance to attend this year’s conference, stay tuned to the GIADA website for more information about the 2017 convention, as well as details about next year’s conference.

How Does a Dealer Floor Plan Work?

image of a flow chart to show how does a dealer floor plan workThe concept of a dealer floor plan is pretty simple: a floor planning lender gives a dealer a line of credit to purchase inventory. However, in the context of daily dealer activities, how does a dealer floor plan work? From winning a bid at a local auction to moving inventory to your lot, there are many unique advantages that a dealer floor plan has to offer, including ease of use and expediting the buying process. Below we have listed the general process for floor planning at an auto auction.

How does a dealer floor plan work? It typically begins at an auto auction…
Using a line of credit begins when a dealer wins a bid for a vehicle at auction. Typically a dealer will be asked how they want to pay for the vehicle. For dealers with a floor plan, they will tell the auction to use the line of credit from their floor plan provider to pay for the purchase.

From that point, the auction will check on the dealer’s line of credit. The auction will send information about the dealer’s purchase to the floor plan provider for funding and approval. Once the purchase is approved by the floor planning lender, the auction will stamp and approve the bill of sale or vehicle gate pass. This shows that the car was paid for, and means that the dealer will be allowed to leave the auction premises with the vehicle. Some dealers will use third party transportation, like Ready Logistics or Central Dispatch to take vehicles back to their dealership lots.

Though each step of the floor plan process is spelled out above, the floor planning experience is extremely simple for dealers purchasing inventory. Do you have questions about how floor planning can benefit your dealership’s business plans? Reach out to your local NextGear Capital representative to learn MORE.

3 Ways Dealers Can Reduce Turn Time and Protect Profits

How long does it take to get newly acquired vehicles on to your dealership lot and ready to be sold? After purchasing, transporting, reconditioning, and posting vehicle details online, it’s easy to see how it could take a while to get a vehicle back to your lot. Unfortunately, taking too long to put inventory on your lot and post it online could be putting your dealership’s profit margins at risk.

It typically takes the average dealer seven to 10 days to make a car customer-ready. However, some reports indicate that the top 20 percent of dealers are able to get cars on the front lines of their lots in fewer than four days. In addition to this, it takes nearly 13 days to merchandise the vehicle online, yet again the top-performing 20 percent of dealers find a way to merchandise within a four day window.

It costs money to keep a car on a dealership lot, even if it is just sitting in a parking space. Figuring out the dealership holding cost per unit per day is a useful metric that can help dealers keep their inventory balanced. Dealers that are interested can use our three floor plan finance formulas to figure out what individual unit holding costs per day are.

Improving efficiency and the speed to retail is one of the most important steps a dealer can take to protect a current and long-term profitability. The faster a dealer can get vehicles to their lot and posted online, the faster that dealer is likely to turn that inventory into profits. The faster a dealer has those profits in hand, the sooner that dealer can buy more vehicles.

In terms of floor planning, it can also be an advantage to speed up the amount of time it takes to get a vehicle ready for customers. Overall, a dealer will spend less purchasing inventory on a floor plan as opposed to cash, especially if a dealership experiences aged inventory. However, the faster a car sells off of a dealer’s lot the less they will spend on floor planning expenses.

Some simple tangible ways dealers can increase speed to market include the following suggestions:

Use tools and resources to buy right: What vehicles in your market are in demand? Are you getting these vehicles at a good price? Tools like vAuto Stockwave, value lookup and individual dealership statistics via Account Portal and the Manheim Market Report are great places to begin looking for details about quality inventory.

Adjust the current  dealership transportation model: It takes time to move a vehicle from point “A” to point “B.” In order to speed up the auction-to-lot process it’s crucial to evaluate how quickly your dealership can transport those vehicles. How efficient is your dealership’s current transportation? Manheim customers can look at solutions such as Ready Logistics to transport dealership cars quickly and efficiently. In addition, NextGear Capital customers have the extra ability to floor plan any transportation costs.

Get vehicles online sooner: In an ideal world, dealers would get vehicles listed for their dealership before leaving the auction. Though that isn’t always possible, aim to have every vehicle online within 24 hours of arriving at the dealership. The sooner the vehicles are online, the sooner potential customers can see the type of inventory available on your lot.

Dealers who take steps to speed up the amount of time it takes to get vehicles from the auction to their lot have increased their chances of turning inventory quickly and growing dealership profitability.

For more information on the benefits of expediting the process from acquisition to retail, click here.

The Do’s & Don’ts of Auto Floor Planning

Chris Tingler using account portal on his mobile device

Dealer Manages his Auto Floor Planning

When dealers use a floor plan, they don’t have to use dealership savings to purchase inventory. This means dealers have a lot more flexibility available when it comes to using their cash. However, auto floor planning comes with its own set of management responsibilities. When it comes to managing a floor plan, dealers should be aware of a number of general “do’s” and “don’ts.”

Do Manage Cash Flow Properly
Floor plans help dealers to manage their cash flow by providing a line of credit for dealers to purchase inventory. With a dealer finance plan in place, dealers don’t need to use their cash on hand to purchase extra inventory. That cash then can go towards other expenses, such as advertising or overhead. Many dealers find success and profit when they manage their cash flow properly and floor plan responsibly by spacing out inventory purchases.

Don’t Floor Plan Irresponsibly
Mistakes happen when dealers use their floor plan irresponsibly. Just because a dealer is cleared to use a $250,000 line of credit, doesn’t mean that a dealer should use that entire line of credit on one day. In addition, if a dealer purchases more inventory than what they can reasonably sell, they’ve put themselves at risk to not be able to make floor plan payments, especially if they use their entire line of credit.

Do Maintain Communication With Floor Plan Financing Company
Not able to make a payment on time with your auto floor planning company? If so, dealers should get in touch with their floor plan financing company. If a dealer is proactive and honest, their floor plan provider will be more likely to work with them to resolve any issues or problems that they may encounter.

Don’t “Ghost”
A floor plan company will always want to know about the health of a dealer’s business. Not communicating potential issues to your floor plan provider can make it harder to remedy potentially preventable issues.

Do Understand Dealer Warning Signs
Dealer floor planning providers keep a close eye on certain signals that can indicate that a dealer might be struggling. The three main signals floor plan providers watch for are the following: collateral audits, insufficient funds (or NSFs), and inventory turn times.

Floor plan finance companies conduct collateral audits to ensure that they can verify inventory. Floor plan auditors will typically conduct an audit based on a time frame determined in a dealer’s contracted terms. If a floor plan company can’t verify a dealer’s inventory, it can be seen as a red flag. Dealers should let their floor plan provider know if inventory needs to be moved from a lot to another location for repairs or for a sale– just to make sure that auditors can verify that information.

Insufficient funds or NSF’s is an indication that dealers can’t make their payments on time, and can be seen as red flag. This is one of the biggest signs that there is an issue with a dealer’s account management, and it affects how the floor plan provider views their chances of being repaid.

Floor plan financing companies also keep a careful watch on average inventory turn times. Holding on to a vehicle for an extended period of time, or aged inventory, is a drain on cash flow and dealer resources. An increase in aged inventory means that is a bit more difficult for a dealer to earn back the initial vehicle investment, which in turn can make it harder to pay a floor plan financing company back because aged inventory compresses profit margins.

Dealers who are aware of these “do’s” and “don’ts” can ensure their auto floor plan is managed properly, and in turn will likely have a pleasant auto floor planning experience in addition to better profits. Have additional questions on floor plan management? Reach out to your local NextGear Capital representative to learn MORE.

Dealing With an Inventory Surplus

An Inventory Surplus on a Car Lot

It’s not uncommon for dealers to make buying decisions that can lead to an overstocked lot or an inventory surplus. Though this might seem like a good problem to have, an inventory surplus can lead to too much aged inventory and constricted cash flow. What are some actions dealers can take to rebalance their lots?

Reevaluate Purchasing Decisions
An inventory surplus can begin with a dealer’s purchasing decisions. Stocking the right inventory depends on a dealer’s ability to judge what type of inventory is best for their particular market. What types of vehicles are potential customers looking for? What type of inventory are customers researching online before they do an in-person dealership visit? If there’s a mismatch between the type of inventory being bought and the type of inventory that sells, a dealer would be wise to adjust their buying strategy.

Create an Aged Inventory Exit Strategy
Keeping aged inventory can tie up dealership cash flow. In order to free up cash flow and ensure vehicle sales, it’s important to create an aged inventory exit strategy. Every inventory exit strategy will differ from dealer to dealer. However, to start it would be wise to consider your strategy for different inventory age points, individual unit breakeven points, and places to get rid of aged inventory. For example, one dealer’s rule -of-thumb could be that when a unit hits the 30-day mark the vehicle price is routinely lowered until it is sold. This helps to maintain web and foot traffic, and in addition helps to keep the inventory on the lot fresh.

Sell Extra Inventory
Keep note of different places to dispose of aged inventory. Don’t just let inventory depreciate on dealership lots. Units that sit and don’t sell take up space and limits room for units that will drive profits.

Instead, sell those aged inventory units at auction. Some dealers will put off this decision in the hopes of avoiding a perceived loss. However, sometimes taking a small loss at auction is often better than leaving a depreciating vehicle on the lot.

Finally, dealerships need to invest more time and effort into building their local dealer network. This network can help to move around inventory to keep dealership lots fresh and interesting to buyers. It also helps ensure that space isn’t being taken up by the wrong vehicles.

Avoiding inventory surplus means dealerships have a balance of inventory and cash flow, fewer aged vehicles and less money tied up in the wrong cars. Making the decision to let go of extra units and aged inventory is a key step to take to ensure profitability of any dealership.