Floorplans are one way dealers finance their inventory. With interests rate low, car dealers are benefiting. Floorplanning fees have also dropped in recent years because of increased competition for dealer business.
Despite these low rates, I recommend dealers not use floorplans if at all possible. Even though its not that difficult to cover the interest on floorplanning, its prudent financial advice to avoid those interest charges.
Also, you can’t get the title UNTIL you pay off the floorplan loan! What if you sell a car to a client who wants to finance the car at their credit union. BUT, the credit union tells you that they won’t fund the loan UNTIL they see the registration slip naming them as leinholder. Well, you can’t title a car without the title and the floorplan company will not release the title til it is paid for ad the credit union won’t give you the money til it is titled! That puts you in a pickle if you can’t pay off the floorplan company to get the title! Just be careful.
Putting cars on floorplans puts added pressure on your to get the car sold in 30 – 60 days. Its true, that can be good pressure but let me tell you, it can be BAD pressure as well.
The more cars you have in inventory that is NOT on a floor plan is a good thing.
Floorplan companies are being more and selective whom they will loan the money. Most floorplanner requires the dealer to a personal guarantee and a physical inspection of the inventory.
My advice: I have seen more than one dealer get into financial trouble with a floor plan. If you do use a floor plan, for the flexibility, make sure you have the cash to cover your credit line. My take on it: use cash!