Dealer glossary
Floor plan
A revolving line of credit a dealership uses to buy inventory, secured by the vehicles themselves and paid off when each unit sells.
Definition
Also called floorplan, inventory financing
Most independent dealerships do not buy their inventory with cash. They borrow against it. A floor plan line lets a store buy at auction and pay the lender back when the car sells, with interest accruing for as long as the unit sits.
That interest is the reason aged inventory is expensive in a way that does not show up on a sales report. A unit that takes 90 days to sell has been costing money every one of those days, and the cost is easy to lose track of when the payable lives in a spreadsheet rather than on the vehicle.
A store often runs more than one floor plan line, with different lenders on different units, which makes knowing what is owed to whom a real question rather than a rhetorical one.
Related terms.
Curtailment →
A required partial paydown on a floored vehicle once it has been in inventory beyond an agreed period.
Aged inventory →
Vehicles that have been in stock longer than the store target, usually measured in days since acquisition.
Days supply →
How long the current inventory would last at the recent rate of sale, expressed in days.
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