Back to all posts

Share this:

Auto Bank Floorplans vs Specialized Floorplan Financing

An auto bank floor plan financing lender hands a loan agreement and pen to a nervous and unsure auto dealer still deciding on who to use for their floorplan financing.

Floorplan financing is often a lifeline for independent dealerships. Not only does it improve a dealers’ inventory purchasing power, it can also serve as a steady foundation for long-term, sustainable business growth. However, the potential gain hinges on the quality and reliability of your floorplan provider. So, if you’re deciding between a specialized floorplan lender like AFC or an auto bank floorplan, it’s crucial to understand how the two differ.

Although a traditional lender like a bank may be  a viable option for inventory flooring in certain instances, there are several drawbacks that may significantly impact a dealership’s operations and success. Let’s explore the cons of choosing bank floorplan loans, and how specialized floorplan providers like AFC can help you avoid these pitfalls altogether.

Specialized floorplan financing means deep dealer industry experience

When considering floorplan lenders for your dealership, it’s essential to recognize the significance of industry-specific experience. Traditional banks, by definition, are broad organizations who offer financial services across various sectors. While this may appeal to a larger customer-base, there is no guarantee that your local bank will have the same level of in-depth understanding and specialized knowledge of the automotive dealership industry.

Auto bank floorplan lenders might approach dealership financing from a generalized perspective, missing out on the nuances and unique challenges specific to the automotive retail environment. Not every bank is the same, but a lack of familiarity with the intricacies of inventory management, seasonal fluctuations, and the automotive market’s rapid changes could lead to less effective support and guidance for your dealership.

Unlike specialized floorplan providers with a deep-rooted understanding of the automotive industry, bank floorplans may not offer tailored solutions that cater specifically to your dealership’s needs. A one-size-fits-all approach might not align with the dynamic and fast-paced nature of the automotive market, potentially resulting in limitations or misalignments in financing strategies. 

By choosing a floorplan lender with dedicated industry experience like AFC, your dealership gains access to a partner well-versed in the automotive retail landscape. AFC’s specialized knowledge allows for a more nuanced and strategic approach to floorplan financing, providing insights and solutions that can directly address the challenges and opportunities unique to your dealership’s success in the automotive market.

BONUS RESOURCE: Click here to read more about “What automotive financial services can an auto finance company offer?

Dealer floorplan lending may not be a top priority for banks

High-profile exits by major financial institutions have left numerous dealers scrambling for alternative financing options, and left many speculating on the reliability of traditional lenders.

In its announcement on March 29th, Capital One shed light on the sudden exit, stating that floorplanning made up “a non-material component of our commercial banking business.” That very same month, Fifth-Third Bank also announced they would be ending their dealer floorplan financing services. In an interview, a Fifth-Third spokesperson explained that while the bank would continue to support independent dealers in other commercial-related areas like treasury management, real estate, and employee benefits, they would be shutting down their inventory floorplan financing services.

Not only were these updates unexpected, the exits also imposed tight deadlines—sometimes as short as 90 days—to secure new financing. Such abrupt changes disrupted dealership operations, causing considerable stress and uncertainty. Dealers found themselves in a precarious situation, urgently seeking alternative financing to sustain their businesses and manage their inventories.

All said, these events serve as a reminder of the risks associated with depending entirely on banks for floorplan loans. It highlights the importance for dealerships to diversify their financing sources and consider specialized floorplan finance providers that prioritize and specialize in the automotive industry, offering a potentially more dependable and stable partnership for sustained business operations.

Auto bank floorplan lending could restrict your inventory purchases 

Dealerships often encounter varying degrees of restrictions depending on the lender they choose. It is possible that a bank will impose stricter criteria and lower loan limits compared to specialized floorplan finance companies. It’s also important to remember that banks will typically require immediate payoff on sold units not on the lot during an audit, regardless of a dealers’ funding status

These constraints may hinder a dealership’s ability to finance the desired inventory size, resulting in restricted purchasing power and potentially impacting the ability to meet customer demands.

Moreover, auto bank floorplan lenders may set limits on a dealer’s line of credit, restricting the amount a dealership can borrow to finance their inventory. These limitations can significantly impede growth opportunities, particularly in competitive automotive markets where having a diverse and robust inventory can make a substantial difference in attracting customers and driving sales.

On the contrary, specialized floorplan finance companies like AFC often offer terms and loan limits tailored specifically for the automotive industry. We understand the importance of inventory diversity and the dealership’s need for financial flexibility.

By opting for a specialized floorplan finance provider, dealerships can access financing solutions better suited to their specific inventory requirements, enabling them to expand their inventory selection and cater to a broader customer base.

Make the right call with the dealership floorplan experts at AFC 

Don’t let uncertainty affect your dealership’s success—opt for AFC which may offer more reliability, consistency, transparency, and flexibility. Click here to start your application to secure a dependable floorplan financing partner for your dealership’s future.

Disclaimer: Descriptions of AFC floorplans are for illustrative purposes only. Terms of AFC floorplan financing are subject to a final written agreement acceptable with AFC. AFC does not guarantee any results for floorplan financing and examples are for illustrative purposes only. Dealers should consult their own advisors to make independent business decisions regarding floorplan financing. AFC is not affiliated with any of the companies mentioned in this article.

“AFC” refers to Automotive Finance Corporation and AFC Cal, LLC in their respective jurisdictions. All California transactions are through AFC Cal, LLC. California loans will be made pursuant to the Department of Business Oversight California Finance Lenders License.