Walk any successful dealer's lot and you're looking at somebody else's money. Not because the dealer is broke - because they're smart. Floor plan financing is how dealerships stock 40, 80, or 200 units while keeping their own cash free for reconditioning, marketing, and payroll.
This guide covers how a floor plan line actually works mechanically - draws, curtailments, audits, payoffs - what it really costs, and how to tell a good floor plan from one that quietly strangles your margins.
What floor plan financing is (and isn't)
A floor plan is a revolving line of credit secured by your vehicle inventory. You draw on the line to buy a unit - at auction, from a trade-in, from another dealer - and that specific vehicle becomes collateral for that specific draw. When the vehicle sells, you pay off the draw, and that credit becomes available again.
It is not a term loan, and that distinction matters. You're not borrowing $500,000 and paying it down over five years. You're financing each unit individually, for the weeks or months it sits on your lot. A dealer flooring 30 units at a time might cycle through $3M of draws in a year while never owing more than $400K at once.
The mechanics: draws, curtailments, audits, payoff
- Draw: you buy a unit and the floor plan company funds it, typically 90-100% of the purchase price. The title is held as collateral.
- Interest: accrues on each outstanding draw, usually prime plus a spread. Most dealers pay somewhere between 8% and 13% APR in today's market.
- Curtailment: at set intervals (commonly 30, 60, 90 days), you pay down a slice of the unit's principal - often 5-10% per period. This is the lender's way of keeping pace with depreciation.
- Audit: the floor plan company physically checks your lot (or uses GPS/photo audits) to confirm floored units are still there and unsold. Sold-but-unpaid units - 'sold out of trust' - are the fastest way to lose a line.
- Payoff: when the unit sells, you repay that draw (usually within 24-72 hours of sale) and the credit revolves back.
What it costs in practice
Pricing has three layers: the interest rate, per-unit fees (flat fees per draw, often $10-$100), and curtailment structure. The real cost driver is your turn rate. A unit floored for 30 days at 12% APR costs you about 1% of its value in interest - a $20,000 car costs roughly $200 to floor for a month. Let it age 90 days and you've tripled that, plus curtailments start biting into your cash.
| Days on floor plan | Approx. financing cost ($20K unit @ 12%) | Impact |
|---|---|---|
| 30 days | ~$200 + fees | Healthy - cost is a rounding error in gross |
| 60 days | ~$400 + fees + 1st curtailment | Manageable - watch the aging report |
| 90 days | ~$600 + fees + 2 curtailments | Margin pressure - consider wholesale exit |
| 120+ days | $800+ and climbing | The unit is now eating your profit |
The rule seasoned dealers live by
Your floor plan should be cheaper than the opportunity cost of your own cash. If flooring a unit costs $200/month but having that $20K free lets you buy and flip another unit at $1,500 gross, the floor plan pays for itself seven times over.
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Who qualifies for a floor plan line
Requirements vary widely between national floor plan companies, banks, and independent lenders, but the typical bar looks like this:
- An active dealer license and a physical lot or established online operation
- 6+ months in business (newer dealers can qualify with stronger personals)
- Reasonable personal credit from the guarantor - many programs work from 600+
- A dealer bond and garage liability insurance in force
How to choose the right floor plan partner
The advertised rate is maybe a third of the decision. Ask about audit frequency and method, curtailment schedules, title processing speed (slow titles kill retail deals), fee schedules for extensions, and how they handle a slow month. A lender who works with your seasonality is worth a point of interest.
This is where working with a marketplace pays off. Dealerun compares floor plan structures from multiple lending partners that actually specialize in automotive - so you're weighing real options side by side instead of taking the first yes.
Why dealers run this through Dealerun
We work exclusively with automotive and equipment-based businesses, and our funding partners compete for your deal - up to $5M, decisions in hours, funding in as fast as 24 hours. One application, multiple offers, zero impact on your credit to look.
See what floor plan terms you qualify for
Two minutes, no credit pull, no obligation - just real numbers from lenders who know the car business.
Frequently asked questions
Does floor plan financing require a down payment?+
Often no - many programs advance 90-100% of the vehicle purchase price at auction. Some lenders hold back a reserve or require a deposit for newer dealers, which typically releases as you build history.
Can a new dealer with no history get a floor plan?+
Yes, though the first line is usually smaller ($50K-$150K) with tighter curtailments. Expect the lender to lean on the guarantor's personal credit and any prior industry experience. Lines grow quickly with clean audits and on-time payoffs.
What does 'sold out of trust' mean?+
Selling a floored vehicle and not paying off the draw within the required window. It's the cardinal sin of floor planning - it can trigger default on the entire line, so build the payoff into your deal-closing checklist.
Floor plan vs. line of credit - which is better for a dealer?+
They solve different problems. A floor plan finances inventory at better advance rates because the collateral is specific and trackable. A working capital line covers everything else - recon, payroll, marketing. Most growing dealers eventually run both.
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