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3 reasons a floor plan loan can help specialty auto dealers

Specialty auto inventory purchased with a floor plan loan

There are many good reasons for any independent dealer to use their floor plan (we prefer to say floorplan financing, but we know everyone doesn’t agree) when purchasing inventory. But for dealers who focus on specialty auto inventory—RVs, snowmobiles, trailers, motorcycles, personal watercrafts, and more—there are a few benefits to a dealer floor plan over cash that stand out. Let’s take a look at how a floor plan loan can benefit specialty auto dealers in particular.

Longer turn times? No problem

Specialty inventory like an RV tends to have a longer sales cycle than your typical used car. Watercraft and powersports vehicles can move quickly on a seasonal basis, but outside of that they tend to take more days to sell. That can raise some issues for some dealers who purchase inventory using cash.

Investing in inventory with longer turn times means you may not see a return on that investment immediately. And while your cash is tied up in inventory, it can’t be working for your dealership elsewhere—such as improving facilities, or investing in personnel. On top of that, maintaining the condition of on-lot inventory is a cost in and of itself.

If that RV or motorcycle is purchased using a floor plan loan, though, its price can be paid over time rather than at the time of purchase. That puts significantly less strain on your cash flow.

And since many floor plan companies provide a range of automotive financial services, including lines of credit specifically designed to help with the unique needs of specialty dealers, a longer turn time may be built into the structure of the agreement between a borrower and a lender. Specialty auto floor plans typically have longer terms and lower curtailments, so that flooring a vehicle for several weeks is reasonable for a dealership.

Seasonal changes in sales are more manageable

In many cases, specialty auto sales will change with the weather. A reality of the business is that it’s easier to sell a motorcycle in pleasant riding weather than when there’s snow on the ground. This doesn’t mean independent dealers take winter off, though. Inventory levels need to be maintained, and vehicles have to be ready for the busy season.

But purchasing a unit in December that you don’t expect to sell until March may not be easy to handle financially when the transaction is made using cash. In fact, even with a shorter term floor plan loan, flooring a vehicle that long isn’t as cost-effective. But with a specialty vehicle floor plan with a longer term, it’s much simpler. Costs are kept lower, and paid off over a longer period of time.

If less cash is coming in because of lower seasonal sales, flooring inventory can help make sure that keeping vehicles on your lot doesn’t break the bank.

Financial—and tactical—flexibility

Cash is useful in most situations, for inventory purchasing and for covering plenty of other dealership expenses. But in a cash transaction, a lot of times you’re paying in a lump sum up front—at the time of purchase—and that could cause problems. A floor plan loan spreads that cost over a longer period of time. This means that, in many ways, flooring inventory can improve your flexibility to use cash to achieve your dealership’s full set of objectives.

A dealer who usually pays in cash may be surprised to learn how flexible a floor plan can be. Whether you’re buying at auction or taking in trades, with the right terms in place a floor plan loan can be used to purchase a wide range of inventory. In most cases, a specialty auto floor plan is built to support non-auction purchases—vehicles that a dealer acquires in a trade or a purchase off the street or a wholesale purchase. When inventory growth is on the menu but cash is light, a floor plan can help bridge that gap.

Floor plan loans to serve specialty auto dealers

With financing terms that are specifically designed to help dealers purchase RVs, powersports vehicles, and more, a specialty floor plan can do a lot of good. It provides financial flexibility, it helps dealers maintain inventory levels during off-seasons, and makes longer turn times much more manageable. For dealers selling anything from travel trailers to mopeds, a specialty vehicle floor plan is an option worth investigating.

Disclaimer: Dealers should consider all factors prior to agreeing to a floor plan and consult with their own advisers to make an independent business decision by reviewing the risks and advantages prior to signing any agreement. These descriptions of floor plan terms are general and actual terms and conditions of a floor plan are subject to the final written agreement between a dealer and its lender. AFC does not guarantee any business outcome based on the contents of this article.