Floor plan financing: how an inventory line actually works

What the line is, and what it is not

Floor plan credit is inventory financing. The lender funds a purchase, takes a security interest in that unit, and expects to be paid off out of the sale proceeds — usually within days of the car selling. Interest accrues per unit, per day, so the cost of a floored car is a direct function of how long it sits.

What it is not: working capital. You cannot floor a car and use the money for parts, rent or payroll, and lenders audit for exactly that. Recon money, if you need it, is a separate conversation with the same lender or a different one.

The five numbers

• Line size. The total exposure the lender will carry across all units.
• Advance rate. How much of the purchase the lender funds — the balance is your cash in the deal, per car.
• Term and curtailment. The number of days a unit can stay floored before you must pay down principal, and how much per step. Curtailments are what punish slow-moving inventory.
• Rate and fees. Daily or monthly interest plus per-unit setup, audit and title fees. Compare total cost per car for a realistic days-on-lot, not the headline rate.
• Audits. How often someone physically counts your cars, and what happens if a floored unit is missing (sold out of trust is the fastest way to lose a line).

None of those terms are standard across lenders, and they change. Get every one of them in writing from your own lender before you sign, and keep the current version in your file — a number remembered from another dealer's contract is not your term.

Carry cost is a per-car number, so it belongs in the per-car math. Add it to your repair and fee lines in the free max-bid calculator before you bid, not after the car is on the line.

Title custody, and the deadlines it collides with

Most lenders take custody of the title, or a lien on it, until the unit is paid off. That is normal, and it is also where a new dealer gets caught: your title obligations to the state and to your buyer run on their own clocks and do not pause while a lender releases a title.

If you issued a temporary permit, you owe the DMV the endorsed title and the supporting documents within 45 days. If you did not, the buyer gets the endorsed certificate within 48 hours — or 21 days if the buyer is a dealer. A lender's title-release turnaround has to fit inside those numbers, so ask about it before you sign, not after your first sale. The clocks themselves are in Utah dealer temporary permits.

Why the auction clock makes a line valuable

The strongest argument for a line has nothing to do with growth. It is that auction payment windows are short and the penalties are mechanical: 3 business days to pay at Copart, a 10% penalty with a $600 minimum once a car goes to relist after 8 days, and $250 per car if you pay with unsecured funds. A dealer waiting for a personal deposit to clear pays those penalties out of the same margin he was bidding for.

The full fee stack you will be funding is in Copart and IAA buyer fees explained — and note that most lines fund the hammer and fees together, which is exactly why your bid math has to include the fees.

Will a lender floor a salvage or branded car?

This is the question that decides whether a floor plan is useful to a rebuilder at all, and it varies by lender and by unit — some inventory lines exclude branded and salvage titles outright, others take them at a lower advance rate.

Ask it in writing during the application, not verbally. If the answer is no, your salvage lane stays a cash lane, and the honest planning number is your own capital — which changes the max bid you can act on, not the max bid itself. See the max bid formula.

Questions to ask before you sign

Get the answers in writing, from the lender, in this order:

• What is the advance rate, and is it computed on the hammer alone or on hammer plus auction fees?
• When does the first curtailment hit, and how much principal does each step require?
• What is the total cost to carry one unit for the days-to-sell I actually expect — not the headline rate?
• Who holds the title, and how fast is a release after a unit is paid off?
• How often are audits, are they announced, and what counts as a unit sold out of trust?
• Which titles are eligible — and specifically, salvage and rebuilt units?
• What happens on a slow month: is there a minimum utilization, an annual fee, or a renewal review?

A lender that answers all seven plainly is a lender you can plan around. Vague answers on curtailments and title release are the two that hurt later, because both collide with deadlines you do not control.

Discipline: the line is not the bid

A funded line makes it easy to bid what is available instead of what is justified. Keep the two separate on paper: the max bid is the number the math produced; available credit is a note beside it. When credit is the binding constraint, you skip cars — you do not raise the max.

And watch days on lot like a cost, because with curtailments it is one. A car that takes an extra sixty days to sell can eat a meaningful slice of its own profit in interest and principal step-downs, which is also why the wholesale exit in dealer-to-dealer wholesale in Utah belongs in the plan before you need it.

Questions dealers actually ask

Can a brand-new dealer get a floor plan?

It depends entirely on the lender's underwriting — expect a personal guaranty and to be asked for business and licensing documentation. Because the terms and eligibility differ by lender and change, get the current requirements from the lender directly rather than from a forum post.

What is a curtailment?

A scheduled principal paydown on a unit that has not sold by a certain age. It is the mechanism that makes slow inventory expensive, and it is the number to model against your realistic days-to-sell before you accept a line.

Does the lender hold my titles?

Usually yes, until the unit is paid off. Confirm the release turnaround in writing, because your obligation to deliver a title to the DMV within 45 days (or to a buyer within 48 hours with no permit) does not pause for a lender.