What is the real meaning of floorplanning in the car dealer business???

Question

I know it has to do with dealer finanicing but what does it consist of...

Answer 1

Look at it this way: when you buy a car, you finance it through a bank and pay interest, right? A dealer does the same thing, except with all of it's cars and the entire thing is called floor plan, they buy the cars and finance them through which ever bank covers their floor plan. Some dealers use the mfg's bank and will get incentive's such as a certain amount of time without interest, some use other banks due to lower interest, and some (very few) do not floor plan at all, they pay cash for the cars.

Answer 2

The dealer has to pay the manufacturer a certain "holding" cost to get the vehicles they order rather than buy them outright although some dealers do this if they have enough money. The longer a vehicle sits on the lot without being sold, the more it costs and the less profit they make so it's important for the dealer to order cars that sell quick. Most dealers would like to turnover a vehicle in 60-90 days or less. Depending on market conditions, some manufacturers will add incentives or lower these costs to get the product out in the market.

Answer 3

yep they usually pay about a pt above prime and finance their inventory for the 60-90 days they hold the vehicle.