If you run a used car lot, your money lives in your inventory. Every unit on the lot is cash that can't be used for the next auction run, a recon job, or payroll - and the size of your lot is usually capped by how much cash you've got sitting in metal, not by how many cars you could actually sell. Floor plan financing is the tool that removes that cap.
A floor plan is a revolving line of credit built specifically for vehicle inventory. Instead of paying for each car out of pocket, you draw on the line to acquire it, the unit sits on your lot as collateral for that specific draw, and you pay the draw down when the car sells. Here's exactly how it works, what it costs in 2026, and how independent dealers use it to out-stock lots twice their cash reserves.
The mechanics: draw, curtailment, audit, payoff
- Draw: you buy a unit at auction or from a trade-in and the floor plan company funds it, typically 90-100% of purchase price. The title sits with the lender as collateral.
- Interest: accrues daily on each outstanding draw, usually prime plus a spread. Most independent dealers pay 9-14% APR in today's market.
- Curtailment: at 30, 60, or 90-day intervals you pay down a slice of the unit's principal - commonly 10-15% per period - so the loan keeps pace with depreciation.
- Audit: the lender confirms floored units are still on the lot, either by a physical visit or a GPS/photo check. Selling a floored unit without paying it off is called 'sold out of trust' and it's the fastest way to lose a line entirely.
- Payoff: when the unit sells, you repay that draw - usually within 24-48 hours of the sale - and the credit revolves back for the next auction run.
Why it matters for a growing lot
The single biggest constraint on a growing dealership is how many units it can carry at once. A floor plan line lets you stock more inventory than cash alone would allow, which means more selection, more foot traffic, and more closed deals every month.
Used correctly, it isn't debt for its own sake - it's leverage that lets your turn rate, not your bank balance, set the ceiling on the business.
What a floor plan actually costs
Pricing has three layers: the interest rate, per-unit fees (often $15-$75 per draw), and the curtailment schedule. The real cost driver is how fast you turn the unit - a car floored for 30 days barely dents your gross, but the same car sitting at 90+ days is eating margin from both interest and curtailments.
| Days on floor plan | Approx. cost ($18K unit @ 11% APR) | Impact on margin |
|---|---|---|
| 30 days | ~$165 + draw fee | Healthy - a rounding error against gross |
| 60 days | ~$330 + fee + 1st curtailment | Manageable - watch the aging report closely |
| 90 days | ~$495 + fee + 2 curtailments | Margin pressure - consider a wholesale exit |
| 120+ days | $660+ and climbing | The unit is now actively losing you money |
The rule seasoned dealers live by
Your floor plan should always be cheaper than the opportunity cost of your own cash. If flooring an $18K unit costs about $165 a month but that same $18K, left free, lets you buy and flip another car for a $1,500 gross, the floor plan is paying for itself many times over.
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What do you need funding for?
Who qualifies for a dealer floor plan line
- An active dealer license and a physical lot or an established online operation
- 6+ months in business - newer dealers can still qualify with a stronger personal guarantee
- Reasonable personal credit from the guarantor - many programs open up from 600+
- A dealer bond and garage liability insurance in force
Choosing a floor plan partner that won't strangle your margins
The advertised rate is maybe a third of the real decision. Ask about audit frequency and method, curtailment cadence, how fast titles get processed (slow titles kill retail deals waiting to close), and how the lender handles a genuinely slow month. A partner who flexes with your seasonality is worth more than a rate that looks good on paper.
This is where running your line through a marketplace pays off. Dealerun compares floor plan structures from multiple funding partners who actually specialize in automotive inventory, so you're weighing real offers side by side instead of taking the first yes you get.
Why independent dealers run this through Dealerun
Dealerun is a funding marketplace, not a direct lender - our funding partners compete to fund your floor plan line. Up to $5M per deal, offers in hours, no credit impact to check, and 4.8/5-rated specialists who read the curtailment schedule with you before you sign anything.
See what floor plan terms you qualify for
Two minutes, no credit pull, no obligation - real numbers from funding partners who know the used car business.
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Frequently asked questions
Does floor plan financing require a down payment?+
Usually no - most programs advance 90-100% of the vehicle's purchase price at auction. Some lenders hold back a small reserve or ask for a deposit from newer dealers, which typically eases as you build a payoff history.
Can a brand-new independent dealer get a floor plan line?+
Yes, though the first line is usually smaller - often $50K-$150K - with tighter curtailments. The lender leans more on the guarantor's personal credit and any prior industry experience, and lines typically grow fast once you show clean audits and on-time payoffs.
What does 'sold out of trust' actually mean?+
It means you sold a floored vehicle and didn't pay off its draw within the required window. It's the cardinal sin of floor planning and can trigger default on the whole line, so build the payoff step into your deal-closing checklist every time.
How is a floor plan different from a general working capital line?+
A floor plan finances specific, titled inventory at better advance rates because the collateral is trackable unit by unit. A working capital line covers everything else - recon, payroll, marketing. Most growing dealers eventually run both side by side.
How fast can a floor plan line fund a new draw?+
Once a line is established, individual draws for auction purchases often fund same-day or next-day. Setting up the original line takes longer - typically a few days to a couple of weeks depending on documentation and lender.
Ready to put this to work?
See what funding your business qualifies for - it takes two minutes and won't affect your credit.