Auto Dealer Floor Plan Financing - The terms "floor plan" and "floor plan financing" are thrown around quite often in dealer and auction circles. But what do these terms really mean and how does floor plan financing work?
Simply put, floor plan and floor plan financing work just like a credit card designed to purchase vehicle inventory.
Auto Dealer Floor Plan Financing
Credit cards are issued by a bank to an individual. After that, individuals can buy personal items with the money taken from the bank. Money taken from the bank accrues interest, and the person has the option of either making the minimum payment or paying off the balance in full when the account is due.
Dealer Floor Plan Finance For Rv Dealers
Like a credit card, a floor plan financing company extends a line of credit to the car dealer. Dealers can then use floor plan lines of credit to purchase inventory from auctions and other inventory sources. If the dealer buys a floor plan car and returns it to his premises and does not sell it within the days specified in the contract, the dealers are charged a small fee. The seller repays the initial loan when they sell their inventory.
In a floor plan, the initial investment required to purchase a particular unit is a fraction of the actual purchase price of the vehicle. Once that car is sold to the consumer, floorplan dealers have the flexibility to make an immediate profit, repay the original cost of the loan plus interest and commissions, and keep their funds working for their dealership.
Floor plan finance companies are uniquely tailored to the needs of car dealers. Using cash or a bank line of credit to purchase inventory may work for some car dealers, but many floor plan financing companies offer special benefits for several dealers. In addition to freeing up cash in the hands of the seller, other floor plan financing benefits can include additional flexibility in terms of paying off a particular piece of inventory, extending payments and increasing credit if needed. Other services are often offered, which may include record management, reseller status title services, lien protection, and state-of-the-art online and mobile account management tools.
Although floor plan financing may seem like a confusing concept, in practice it can be an extremely useful business strategy for car dealers.
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Want to learn more about floor plan financing? Contact us and we'll guide you on how to do MORE as a NextGear Capital reseller. Floor planning can be intimidating at first, but it's actually quite simple. In the simplest terms, floor plan financing works just like a credit card designed to purchase car inventory. This line of credit saves dealers from using their own cash. An increase in cash flow allows dealers to use that cash for other dealer needs rather than relying on inventory.
Most companies that offer car dealership floor plan options want to make floor planning as easy and useful as possible for independent car dealers. Be sure to follow these guidelines before you begin floor planning.
The decision to put your inventory on the floor plan is often not an easy one. It's important to do some research to find out if floor planning is right for your business. In most cases, dealers are looking for floor plan financing options for all the great benefits to the franchise.
Dealers often boast how much time is saved by floor planning in addition to the increased cash flow after deciding on a floor plan. In many cases, cash-only dealers do additional paperwork to ensure their vehicle is properly purchased. When dealers finance a car with a floor plan, they simply make an offer and put the unit on the line of credit.
Member Only Car Buying Service
It's also important to explore floor plan financing options. You want to find a lender to work with and develop a plan that fits your specific franchise needs.
Unfortunately, the floor planning services offered by banks and local lenders are not always consistently offered. Over the years, a number of financial institutions have entered and exited the floorplanning business, and support and focus on these efforts has varied depending on the profitability of the bank or local lender's floorplanning program.
Fortunately, there are several floor plan financing companies that are committed to serving only smaller, independent sellers with flexible terms to suit their business needs.
There are many factors to consider when choosing a floor plan financing company. While some dealers focus on getting the best prices, it's also important to consider the resources each company provides.
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For example, NextGear Capital floor plans come with many different dealer resources. Our dealers can access over 1,000 live and online auction resources, Cox Automotive's Manheim Market Report and Kelley Blue Book appraisals from the comfort of their Account Portal.
Once you've decided which car dealership floor plan lender is right for your business, it's time to apply!
Some companies, like NextGear Capital, allow you to start the application process online. The application process varies by company.
To be eligible to use a car dealer's floor plan, the seller must have credit. In particular, the history of credit utilization and debt repayment. Floor plan lenders want to see what the seller's credit history is like. A low credit score and some bad credit history won't always prevent a person from using a floor plan, but it will likely limit the amount of equity a lender is willing to lend to a particular seller.
Floor Plan Lending
Many auction sites accept a number of car dealership floor plan companies as payment options. This means that the auctioneer really only has to worry about buying inventory. With a floor plan, dealers don't have to worry about managing back-end operations and details. All the seller has to do is bid and get the blocked tickets from the correct department to complete the purchase.
Car dealership floor plans ensure that the dealership has the capital needed to purchase inventory and free up cash to pay for other expenses such as facility improvements. Floor plans ensure that cash is not depleted due to depreciation, and dealers do not have to spend extra time at auctions or waiting for checks to clear.
Dealers will also have access to all the resources the lender has to offer. For example, NextGear Capital's Account Portal. The Account Portal is accessible from any mobile device and displays dealer account details. They can manage audits, use Rapid Pay and more.
Ready to join 23,000+ dealers and floor plans with NextGear Capital? Please contact your local representative or contact us.AutoHouse is the ultimate exclusive showcase and members-only social club for owners of the world's finest cars and motorcycles. Miami-Dade is a purpose-built lifestyle destination serving Miami Beach, Aventura, Sunny Isles and South Broward, offering car enthusiasts the luxury of living and showcasing their prized vehicles in an environment that combines advanced safety systems with high design. and private concierge services. Located at the top of the AutoHouse, the rooftop social club has excellent indoor and outdoor facilities, as well as a climate-controlled warehouse for fine wine and cigar collections.
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