Floor planning is not a complicated process. You buy a car, you floor the car, you sell the car, and then, you payoff the car. Simple, right? Yet within those basic tasks so many other variables exist. So, lets walk through those things to boost your performance with your floorplan provider.
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- When buying and flooring units, having them available for sale is extremely important. This means getting new purchases transported and to the reconditioning vendor of choice. Once that is done, it’s necessary to have the units on the front line and ready for sale. A good rule of thumb is to shoot for less than 14 days. There will obviously be some stubborn units that will take longer but targeting a two-week turnaround time or less is best. Time is money.
- In flooring, curtailments always come into play as one of the downfalls of a defaulted dealer. How can you avoid being one of them? The simplest way on paper is to always ensure that you have a 20% cash reserve or liquid money that can cover your curtailments. Twenty percent is based on your floorplan payable figure. For instance, if you have $50K outstanding on your line of credit, try to have $10K available for floorplan payments. Do not try to buy more cars with your cash if it will deplete your reserve. Cash will always bail you out, so keep some handy.
- Timely payoff of sold units is vital! When your finance manager delivers a car, they must have a guarantee that the deal will be funded in a timely manner if financed. When a car is removed from the lot as a sold unit, your time to pay off your floorplan starts. Most floorplans require payoff within one week of the sale date or you will have to pay it off with your cash reserve. This can cause a big issue if curtailments come due when the sold unit is also due. A great way as an owner to incentivize your finance manager is to deduct a late fee from their commission on deals that are not funded within a week. This will require your finance manager to follow up vigorously.
- Per our last write up detailing audit performance, this process also impacts your dealership. Making sure you have information on your financed units at your fingertips will make you shine as a floorplan customer. Click here for more information on how to have a great audit. https://www.useafs.com/lot-inspections-your-dealerships-credit-report/
If you stick closely to these four tips, it is possible to have a great relationship with your floorplan provider. At AFS, we strive to educate our customers and build solid business relationships with them. You are not just a number here, you become a member of our family.