Flooring is not a complicated process. You buy a car, you floor the car, you sell the car, and then you pay off the car—simple right? Yet within those seemingly basic tasks so many other variables exist. So, let’s walk through those items to see how you can boost your performance with your floorplan provider.
- When buying and flooring units, having them available for sale is extremely important. This means getting new purchases transported in a timely fashion and to the reconditioning vendor of choice. Once that is done, having the units on the front line and ready for sale will cut down on holding costs. A good rule of thumb is to shoot for less than 14 days. There will obviously be those stubborn units that take longer to move; however, targeting 14 days or less is a sound strategy. Time is money.
- In flooring, unpaid 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 curtailments. Twenty percent is based on your floorplan payable figure. For instance, if you have $50,000 outstanding on your line of credit, try to have $10,000 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 fund quickly 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. As an owner, a great way 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.
- As we laid out tips on audit performance in the last post, note that audits also play a role in your performance. 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.
Following as closely as possible to these four tips will help to ensure a great relationship is built and sustained with your floorplan provider. At AFS, we strive to educate our customers and build solid business relationships with them. Remember, you are not just a number at AFS, you become one of our family.