Floor Plan Payoff

Floor plan payoff is the procedure of settling the financing (floorplan) on a vehicle once it is sold, particularly for new or used inventory that was financed via a floorplan line of credit. Most dealerships in Canada finance their vehicle inventory through banks or financial arms, meaning when they receive cars (new from the factory, or used via trade/auction), they are essentially buying them on credit. Interest accrues until the car is sold. When a car is sold to a retail customer, the dealer must then pay off that vehicle’s loan on the floorplan, typically within a short window (often a few days). The process: after a sale, the accounting office takes the proceeds from the sale (especially the part financed by the customer’s bank or the customer’s payment if cash) and uses those funds to pay the floor plan lender the principal for that particular vehicle. This is recorded to free up that credit line space and stop interest on that unit. Many floorplan companies electronically tie to the DMS and may auto-deduct from the dealer’s account when a sale is reported. A critical aspect is to do this promptly – a delay can incur extra interest or penalties, and in worst cases, not paying off floorplan while selling the car (called being “out of trust”) is serious and can lead to lender issues or audits. In dealership processes, often the title or ownership paperwork for a car (or in Ontario, the new car NVIS) is only handed over to the dealer once the car is floored; similarly, a lien release for a used trade might be held until floorplan payoff. So, floor plan payoff is essentially the last financial step of turning inventory into cash: it closes the loop on that car’s financing so the dealer actually owns the proceeds outright. Effective cash management and timely paperwork in this process ensure good standing with floorplan providers and maintain the dealership’s financial stability.