Floor Plan Financing

Floor plan financing is a line of credit that dealerships use to purchase and hold their vehicle inventory. Rather than paying cash for each car on the lot, dealers borrow against a floor plan account to stock new and used vehicles, and they pay interest on these loans while the cars remain unsold. In Canada, many dealers obtain floor plan financing through banks or specialized automotive lenders. When a vehicle is sold, the dealership uses the sale proceeds to pay off that vehicle’s floor plan loan (known as a floor plan payoff). Effective floor plan management is vital, as interest costs can add up, affecting the dealership’s profitability if inventory sits for too long.