Floor plan financing for used car dealers: how it works
Floor plan financing for used car dealers explained: credit lines, daily interest, curtailments, stock audits, cost per car and when it pays.
· 8 min read
Floor plan financing for used car dealers is a revolving credit line that pays for stock: the lender funds each car when you buy it, charges interest for every day it sits in stock, and is repaid when it sells. It lets you hold more cars than equity allows, but it pays only when stock turns quickly and margins cover interest, fees and curtailments.
What is floor plan financing for used car dealers?
Floor plan financing – also called stocking finance, stocking loans or, in German, Einkaufs- or Lagerfinanzierung – is a short-term credit facility secured on the vehicles it pays for. Each car is a separate drawdown under an overall limit, and the lender usually keeps a security interest in the car (often by holding the registration or ownership document) until it is repaid.
A typical cycle for one car:
- You buy a car at auction or from a supplier.
- The lender pays the seller directly, or reimburses you, up to an agreed percentage of the purchase price or trade value.
- Interest accrues daily from the funding date.
- When the car is sold, you repay that car's balance within an agreed short period, often a few days.
- The repaid amount becomes available again for the next purchase.
Franchised dealers usually get floor plans from the manufacturer's captive bank. Independent used car dealers use banks, specialist stocking-finance lenders or, increasingly, finance attached to trade platforms and auctions.
The main terms in a stocking agreement
Stocking agreements differ a lot between lenders, so read them term by term. The terms that matter most are below.
| Term | What it means | What to check |
|---|---|---|
| Credit limit | Maximum total funded stock | Whether it grows with your sales history |
| Advance rate | Share of each car's price the lender funds | 100% of purchase or less; are fees and transport included? |
| Interest rate | Usually a reference rate plus a margin | Fixed or variable, how it is charged |
| Fees | Per-car funding fees, audit fees, account fees | Fees can cost more than interest on fast-moving stock |
| Curtailments | Required partial repayments as a car ages | Days at which they start and how much |
| Maximum term | Days after which the car must be fully repaid | Usually tied to stock age |
| Repayment on sale | Days you have to repay after selling | Sold-out-of-trust rules |
| Security | What the lender holds | Registration documents, personal guarantees |
Ask for a worked example on one car: purchase price, days in stock, interest, fees and curtailments. If a lender cannot show you that, the pricing is not transparent enough.
For car dealers
Know your margin before you buy
MyCarDealer compares any car from an auction or listing with the market in your country and shows the net margin after VAT, transport and costs – and the maximum bid.
Request accessHow much does stocking finance cost per car per day?
The daily interest cost is the funded amount × annual rate ÷ 365. On top come per-car fees, which you should spread over the expected days in stock.
Example (illustrative figures, not a lender offer):
- Car funded: €15,000
- Annual interest rate: 7%
- Funding fee: €40 per car
Daily interest: €15,000 × 0.07 ÷ 365 = €2.88 per day.
| Days in stock | Interest | Fee | Total finance cost |
|---|---|---|---|
| 30 | €86 | €40 | €126 |
| 60 | €173 | €40 | €213 |
| 90 | €259 | €40 | €299 |
| 120 | €345 | €40 | €385 |
Interest is rarely the biggest holding cost. A used car also loses value while it waits, and that depreciation – plus insurance, space and advertising – usually costs more per day than the floor plan. The finance cost is the part you can see on a statement, which is why it gets attention. Our guide to stock turn shows how to put all holding costs together.
What are curtailment payments?
Curtailments are partial repayments the lender requires once a car has been in stock for a set number of days. Their purpose is to reduce the lender's exposure on ageing cars, which lose value while the loan stays the same.
A typical structure looks like this (example only):
- Day 0–90: interest only.
- Day 91: repay 10% of the original advance.
- Every 30 days after: a further 10%.
- Day 180 or 270: the remaining balance is due in full.
Curtailments hurt cash flow precisely when a car is not selling, so they act as a built-in alarm. A dealer with many cars hitting curtailment dates is a dealer whose buying prices are too high or whose prices are not being reduced in time. See used car price reductions for a practical reduction schedule.
What do lenders check in floor plan audits?
Lenders send auditors, often unannounced, to check that every funded car is physically on your premises or properly accounted for. The main things they check:
- Physical presence: each funded VIN is found on site, at a body shop or at a documented location.
- Sold out of trust: a car that has been sold but not repaid. This is the most serious breach and can lead to termination of the line.
- Documents: registration and ownership documents held as agreed.
- Condition: damage or missing cars that reduce the value of the security.
- Demonstrators and loan cars: whether their use is allowed under the agreement.
Keep a daily reconciliation between your stock list and the lender's funded list. Most audit problems come from cars sold on Friday and repaid the following week, or from cars at a body shop that nobody recorded.
When does floor plan financing pay off?
Floor plan financing pays off when the extra cars it lets you hold sell fast enough to earn more than the interest, fees and depreciation they cost. It does not pay off when it lets you buy cars you would not otherwise buy, at prices you would not otherwise pay.
A simple test per car: expected net margin after VAT − (daily holding cost × expected days to sell) > your minimum profit per car. If a car only works on the assumption that it sells in 20 days, and your average is 55, it does not work.
Three conditions make floor plan a good tool:
- Fast, predictable stock turn. Mainstream models priced at market sell in a predictable time.
- Disciplined buying. You know the market price before you bid, so you are not funding overpaid cars.
- Clear ageing rules. Cars are reduced or wholesaled before curtailments begin.
MyCarDealer shows the market price, the net margin after margin-scheme VAT and the maximum bid for auction and listing cars, which helps keep funded stock at prices that can sell – you can test any car with a free valuation.
Alternatives to floor plan financing
Not every dealer needs a floor plan. Common alternatives:
- Overdraft or revolving credit: more flexible, not tied to individual cars, but often more expensive and limited.
- Equity and retained profit: no interest, but slower growth.
- Supplier credit: some trade sellers or auctions offer short payment terms.
- Sale-or-return and consignment: you sell a car on behalf of the owner and never own it.
Whichever source you use, track the cost of capital per car per day in your car dealer KPIs, so you know what each day in stock really costs.
Frequently asked questions
What is floor plan financing for used car dealers?
It is a revolving credit line secured on stock. The lender pays for each car when you buy it, charges interest daily while the car is in stock and is repaid when you sell it, after which the credit is available again.
How much does stocking finance cost per car per day?
Divide the funded amount by 365 and multiply by the annual rate. A €15,000 car at 7% costs about €2.88 a day in interest, plus any per-car fees. Depreciation while the car waits usually costs more than the interest.
What are curtailment payments?
Curtailments are partial repayments a lender demands once a funded car passes a certain age, for example 10% of the advance after 90 days and every 30 days after that. They protect the lender against falling values and put pressure on the dealer to sell or reduce ageing stock.
What do lenders check in floor plan audits?
Auditors check that every funded car is on site or accounted for, that sold cars have been repaid, and that documents are held as agreed. A car sold but not repaid – "sold out of trust" – is the most serious breach.
Is floor plan financing worth it for a small used car dealer?
It is worth it if your stock turns quickly and you buy at market prices, because it lets you show more cars without tying up equity. It is not worth it if it encourages you to hold slow-selling cars, because interest, fees and curtailments then eat the margin.