Every dealer asks the same first question about floor planning: 'what's the rate?' And every experienced dealer knows the rate is the least interesting number on the term sheet. The real cost of a floor plan lives in the fee schedule, the curtailment structure, and - more than anything - how fast you turn your inventory.
Here's the full cost anatomy, with real math you can apply to your own lot.
The four costs that make up your true floor plan expense
- Interest - typically prime + 2% to prime + 6% depending on your profile. On today's prime that lands most dealers between 9.5% and 13.5% APR, accruing daily on outstanding draws.
- Per-unit fees - flat charges on each draw ($10-$100), title handling fees, and sometimes NADA/valuation fees. On cheap units these matter more than interest.
- Curtailments - not a fee, but a cash-flow cost. Paying 10% of principal at day 30/60/90 pulls cash out of your pocket before the car sells.
- Extension and audit fees - flooring past the standard term (often 120-150 days) triggers extension fees; missed audits or violations carry penalties.
Worked example: what one unit really costs
Say you floor an $18,000 SUV at 12% APR with a $50 draw fee and 10% curtailments at 30/60/90 days:
| Scenario | Interest | Fees | Total cost | % of unit |
|---|---|---|---|---|
| Sells day 25 | ~$148 | $50 | ~$198 | 1.1% |
| Sells day 55 | ~$326 | $50 | ~$376 | 2.1% |
| Sells day 85 | ~$503 | $50 | ~$553 | 3.1% |
| Sells day 120 | ~$710 | $50 + extension | $850+ | 4.7%+ |
Against a typical $1,800-$2,500 front-end gross on a unit like this, flooring costs 8-10% of your gross if you turn in under 30 days - and can eat a third of it if the unit ages past 120. The floor plan isn't expensive. Slow inventory is.
Watch the curtailment trap
Aggressive curtailment schedules (10%+ every 30 days) on slow-turning inventory can force you to inject more cash into a unit than you'd have spent buying it outright. Always model curtailments against YOUR average days-to-sale, not the lender's brochure.
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How to lower your floor plan cost
- Negotiate off your turn rate: dealers averaging under 45 days-to-sale have real leverage on rate and fees.
- Match the credit line to actual usage - unused line fees exist at some lenders.
- Floor selectively: high-margin, fast-turning units first; marginal auction buys deserve your own cash or a pass.
- Re-shop your line every 12-18 months. Floor plan pricing is competitive and switching costs are lower than dealers assume.
Let lenders compete on your numbers
Dealerun puts your profile in front of multiple floor plan and inventory-financing partners at once. Dealers routinely shave 1-2 points and meaningful fees just by having a second real offer on the table. It costs nothing to compare.
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FAQ
What is a curtailment in floor plan financing?+
A scheduled partial paydown of a floored unit's principal - commonly 5-10% at days 30, 60 and 90. It protects the lender against depreciation and nudges dealers to move aging inventory.
Are floor plan interest rates negotiable?+
Absolutely - especially with 6+ months of clean audit history and a documented turn rate under 60 days. Fees (draw fees, title fees) are often even more negotiable than the headline rate.
Is floor plan interest tax deductible?+
Floor plan interest is generally deductible business interest for dealers, and it received specific carve-outs under recent tax law - but confirm treatment with your CPA for your entity and state.
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