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FLOOR PLANNING ALTERNATIVE FOR USED CAR DEALERS

Dealer floor plans have put countless dealers out of business. Many dealers get their license, obtain a dealer floor plan, then buy just twenty or thirty cars and the spin begins. The interest that you must pay every month on a used car dealer floor plan can end up being much larger than what you expect. All you need is a few slow months and you are driving your cars back to the auction. Just head to any dealer auction and you will see several dealers that end up paying top dollar for floor planning cars with little hope of turning inventory at a rate that can keep up with the cost of the floor plan, then eventually bring them back to the auction at an additional cost.

Times are changing and the way we think about financing are changing too.There is an alternative to traditionally used car floor planning.   Take a minute to review the information below determining the true cost of floor plan financing as published by Netgear. Then give us a call and let us help you find the perfect alternative for your dealership.
 
What is the true cost of a traditional floor plan per day?

Every day that a unit sits on a lot, it costs a dealer money. Figuring out the holding cost per day allows dealers to determine what units need to be turned quickly, what units are able to sit for a while, or what units a dealer might need to consider selling at auction. This floor plan finance formula will require a dealer to have a good handle on total dealership expenses and inventory for the entire month. First, a dealer would need to figure out their monthly holding cost. To figure this out, a dealer would subtract their monthly selling expenses from their total expenses for the month. A dealer’s monthly selling expenses are variable monthly expenses that are not charged to the customer. These monthly selling expenses include items such as commissions, advertising, salaries, demo expenses and fuel. Let’s say a dealer’s total monthly expenses are $148,485, and their monthly selling expenses are $57,437.

Total Monthly Expenses   $148,485
Monthly Selling Expenses   – $57,437
Monthly Holding Cost   = $91,048
 Dealers can determine the monthly holding cost per unit once the monthly holding cost is figured out. The monthly holding cost per unit is found by dividing the monthly holding cost by the number of retail units in stock for the month. Let’s say this month a dealer had 85 units in stock.
Monthly Holding Cost   $91,048
Units In Stock This Month   ÷ 85 Units
Monthly Holding Cost Per Unit   = $1071.15
 The holding cost per unit is a useful metric that can help a dealer keep their inventory balanced as well as determine how quickly a dealer might need to turn a unit.


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