4 ms·

The article seemed to imply that the dealer owns the inventory, where as I was just saying that the lines aren't always so cut and dried. It's not uncommon for

The article seemed to imply that the dealer owns the inventory, where as I was just saying that the lines aren't always so cut and dried. It's not uncommon for a dealer to buy a vehicle at auction without getting the title at the time of the auction purchase, floor it, then sell it with outside financing before the title is even in hand. So the title essentially jumps from the auction seller to the outside finance company of the end buyer at some point after the time of the sale. The dealer never actually spends any money out of pocket for the vehicle, since it was floor planned. Having a car last on your lot longer than the floor plan term usually means that it was a bad fit for your customer base (like stocking luxury cars in farm country) or you don't have good salesmen. Almost all sales are finalized before the floor plan term is up, so there is no out of pocket cost to the dealer up front. Dealers can return vehicles to the auction in some cases (for a fee), but usually that's only in the case of the auction itself being misleading (not disclosing prior major repair, salvage title status, or things like that).

ValG 11y ago
Floorplanning a car is still ownership, the only thing is that you're doing short term financing at very low interest rates. But once that financing is up, you still have to account for the $$ of the car. IF you don't sell it, you'll likely take it back to auction and sell it there (usually for a loss), so inventory risk is still present. Franchise dealers have floorplanning for sure, independents not so much. Plus, for USED cars, you usually don't floorplan those (from what I remember). There used to be a saying, if you want to find a Franchsie Dealer that was on it's death bed, look for the one that is floorplanning it's used inventory.
- fluxquanta 11y ago
  Without getting too specific, my company works almost exclusively with independent used car dealers (on the order of thousands across the country), and a majority of them absolutely floor plan their used inventory. Just look at the sites for NextGear[0] and AFC[1], targeting floor planning of used inventory: "Our credit lines are accepted at over 1,000 auctions and accessible with other inventory sources throughout the U.S." and "Use your AFC line of credit to finance customer trades, dealer-to-dealer transactions and purchases made from auctions, leasing companies and other sources." This is how these services are being used. And I'm not saying they won't eventually have to account for that inventory financially, but the process moves so quickly (at least at successful dealerships) that the dealer's bank statement will probably never even take the hit for the vehicle, because it's acquired and sold within weeks or days if they're buying the right inventory for their customers. The ones who aren't go out of business. You're conflating independent used dealerships with franchise new dealerships who also happen to sell used cars. [0] http://www.nextgearcapital.com/inventory-finance/ http://www.nextgearcapital.com/inventory-finance/ [1] https://www.afcdealer.com/wps/portal/afcd/products/ https://www.afcdealer.com/wps/portal/afcd/products/

ValG 11y ago

Floorplanning a car is still ownership, the only thing is that you're doing short term financing at very low interest rates. But once that financing is up, you still have to account for the $$ of the car. IF you don't sell it, you'll likely take it back to auction and sell it there (usually for a loss), so inventory risk is still present. Franchise dealers have floorplanning for sure, independents not so much. Plus, for USED cars, you usually don't floorplan those (from what I remember). There used to be a saying, if you want to find a Franchsie Dealer that was on it's death bed, look for the one that is floorplanning it's used inventory.

fluxquanta 11y ago
Without getting too specific, my company works almost exclusively with independent used car dealers (on the order of thousands across the country), and a majority of them absolutely floor plan their used inventory. Just look at the sites for NextGear[0] and AFC[1], targeting floor planning of used inventory: "Our credit lines are accepted at over 1,000 auctions and accessible with other inventory sources throughout the U.S." and "Use your AFC line of credit to finance customer trades, dealer-to-dealer transactions and purchases made from auctions, leasing companies and other sources." This is how these services are being used. And I'm not saying they won't eventually have to account for that inventory financially, but the process moves so quickly (at least at successful dealerships) that the dealer's bank statement will probably never even take the hit for the vehicle, because it's acquired and sold within weeks or days if they're buying the right inventory for their customers. The ones who aren't go out of business. You're conflating independent used dealerships with franchise new dealerships who also happen to sell used cars. [0] http://www.nextgearcapital.com/inventory-finance/ http://www.nextgearcapital.com/inventory-finance/ [1] https://www.afcdealer.com/wps/portal/afcd/products/ https://www.afcdealer.com/wps/portal/afcd/products/