Dealer Floor Planning 101

Dealer Floor Planning 101 GetMyAuto

When launching a used car dealership, one of the terms you’ll hear thrown around quite a bit is floor planning. No, this isn’t a reference to the layout of your physical space. Rather, your dealer floor plan refers to an important financial component—specifically, the way your dealership will pay for inventory.

To put it simply, you probably don’t have hundreds of used cars readily available for sale—and acquiring them can be quite costly. Maybe you have the liquid capital to buy a huge inventory, but most dealerships don’t. That’s where floor planning comes into play.

In this post, we’ll take a closer look at what dealer floor planning is and how it works.

Floor Planning Works Like a Credit Card

The easiest way to think about floor planning is that it’s like a credit card for your used car dealership. The catch is, you can use this credit line for one thing and one thing only—and that’s purchasing vehicle inventory.

Basically, your dealership will apply for a floor plan credit line from a floor planning company. You can then use that credit line at auto auctions and other inventory sources.

Whatever vehicles you buy with your floor plan credit line are taken back to your dealership—and hopefully, they are sold quickly! When you sell one of these cars, you repay the original loan from your floor plan lender.

As a dealer, you are contractually obligated to sell this inventory within a certain number of days—and if you don’t, then you will owe a small, additional fee to the floor plan lender. Over time, these small fees can add up, which is why it’s vital to use your floor plan financing judiciously. You never want to buy more inventory than you really need, nor to buy vehicles that you think will be difficult to sell.

Working with a Floor Plan Financing Company

Note that your dealership is not required to work with a floor plan company; you can also consider loans from more traditional lenders, like banks and credit unions.

With that said, most dealerships work with floor planning companies precisely because these companies are attuned to the needs of used car sellers—and they can provide flexible financing services that are designed to help your dealership grow. Some of the add-ons you might get from your floor plan financing company include online account management, record-keeping, title services, and more.

Starting a Successful Dealership

Certainly, as you open a used car dealership, it’s vitally important to think about how you’ll pay for your inventory. Floor planning companies will often offer you the best solutions.

If you’re interested in connecting with a floor plan financing company, Get My Auto can recommend some. Reach out to us today to learn more.

And, if you have any additional questions about starting a used car dealership—including questions about marketing or website design—we encourage you to contact our automotive marketing experts at your next opportunity.