Floorplan Financing
What Is Floorplan Financing?
Floorplan financing is a type of short-term loan that allows dealerships to purchase and hold vehicle inventory.
Manufacturers or financial institutions provide funding so dealers can stock vehicles without paying upfront.
The loan is secured by the inventory itself.
Why It Matters
Floorplan financing:
- Enables inventory management
- Impacts dealership operating costs
- Influences vehicle pricing flexibility
Dealers incur interest costs while vehicles remain unsold.
Longer inventory holding periods increase financing expenses.
How Floorplan Financing Works
Floorplan financing provides the dealership with credit to acquire vehicles from manufacturers.
The dealer pays interest on each vehicle until it is sold.
Example: If a dealer finances a $30,000 vehicle and pays monthly interest until sale, prolonged inventory time increases carrying costs.
Once sold, the dealer repays the floorplan lender.
Floorplan Financing vs. Dealer Holdback
Floorplan Financing → Loan to carry inventory
Dealer Holdback → Manufacturer reimbursement
One is financing, the other is compensation.
FAQs About Floorplan Financing
Does floorplan financing affect vehicle prices?
Inventory costs may influence pricing decisions.
Who provides floorplan loans?
Banks or manufacturer-affiliated finance companies typically provide them.
Is floorplan financing long-term?
It is generally short-term until inventory is sold.
Related Terms
