Buying inventory for your dealership can be challenging without significant capital. Vehicles cost thousands or tens of thousands of dollars apiece, and you need a full inventory to attract customers. Instead of tying up your dealership's capital in inventory, consider financing solutions.
Floorplan financing is a popular option for dealers looking to increase buying power and improve cash flow. What is floorplan financing for car dealerships? Read ahead to learn how this revolving line of credit works and how to manage inventory to make the most of it.
Floorplan financing is a short-term revolving line of credit for auto dealerships. Dealers can use this credit to finance vehicle inventory and repay the lender as each unit sells. With a revolving line of credit, they can access ongoing capital to buy inventory at auctions and sales.
Floorplan financing typically follows a sell-to-pay model, in which the lender pays the manufacturer or auction house directly for the vehicle and places a lien on the asset. The dealership then repays the principal balance immediately when it sells the car.
This type of dealer financing usually covers between 95% and 100% of new vehicle costs and 75% to 90% of used vehicle costs. Lenders charge daily interest on outstanding balances and administrative fees for the line of credit. They also often have curtailment requirements, where the dealer must make partial principal payments after a certain time frame to reduce the balance on unsold inventory.
Floorplan financing is a popular choice for car dealerships for a few reasons:
To minimize curtailment obligations and fees when using floorplan financing, you should aim to turn dealership inventory quickly. Every day a car sits on your lot increases accrued interest and reduces profitability.
The industry rule of thumb is generally to turn inventory within 45 days. Vehicles that sit longer than 60-90 days face significant margin erosion from accumulated interest.
Track turnover closely and establish an actionable aged-inventory strategy for vehicles nearing this deadline. Consider wholesale liquidations or special promotions to clear slow-moving inventory.
It also helps to keep communication with your lender transparent during periods of slow sales. Notify them if you need to delay a payment or could benefit from a temporary adjustment to your financing terms. Many lenders offer portals you can use to track active financing and curtailment dates to minimize penalties.
Floorplan financing can be an effective solution for dealerships that want to reserve capital for operating expenses and expand purchasing capacity. This financing solution often leads to increased sales and customer satisfaction.
If you're looking for floorplan financing, Edge Financial Services LLC offers comprehensive solutions for dealerships. We understand the challenges dealerships face and serve as a "financial ecosystem" to meet multiple financing needs.
Learn more about our financing solutions by calling 866-890-2415.
Dealerships need more than funding–they need a financial partner that understands the complexities of operating and growing within the automotive industry. At Edge Financial , we take pride in building lasting relationships that help dealers achieve both short-term goals and long-term success.
Our dealer-centric approach means we focus on understanding your business before recommending solutions. We work alongside dealerships to identify opportunities, overcome challenges, and develop financing strategies that support sustainable growth. By offering multiple financial solutions through a single relationship, we help simplfy the path toward expansion and profitability.
We are committed to delivering responsive service, industry expertise, and dependable financial solutions that help dealerships operate with confidence. When dealers choose Edge Financial , they gain a partner dedicated to helping them succeed through every stage of growth.
If your dealership is looking for more than a traditional lender, Edge Financial is ready to help. Through our dealer-centric financial ecosystem, we provide the financing solutions, resources, and strategic support dealerships need to expand opportunities and achieve long-term success.
Whether you're interested in portfolio acquisitions, point-of-sale financing, floorplan financing, or dealer credit facilities, our team is prepared to help identify solutions that align with your business goals. We believe the strongest dealership relationships are built through collaboration, trust, and a shared commitment to growth.
Serving dealerships throughout the U.S., we are focused on helping clients increase flexibility, improve profitability, and access the capital neccessary to pursue new opportunities. Our integrated approach allows dealerships to work with one trusted financial partner instead of managing multiple providers.
Contact Edge Financial today at (866) 890-2415 to learn more about our dealer-centric financial ecosystem that discover how our team can help support the future growth of your dealership.
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