The State of Automotive Floor Planning: Things to Know in 2024 and Beyond

July 10, 2024

The State of Automotive Floor Planning: Things to Know in 2024 and Beyond

Floor planning is one of the most important processes for auto dealerships that want to grow responsibly. In the automotive industry, floor planning is a type of inventory financing for retail goods. Dealerships use floor plan loans to finance the purchase of vehicles, allowing them to maintain a robust inventory without paying for the cars upfront. This system helps dealerships manage their cash flow and ensures that they have a variety of vehicles available for customers.

 Floor planning is complex, especially given today’s unpredictability with the three key dynamics involved in the process: interest rates, lending criteria, and new vehicle inventory. 

 At Dave Cantin Group (DCG), our advisory services division provides support for a variety of capital needs, including working with dealers to find the right floor plan financing partners.  Continue reading to learn more about the state of floor planning in 2024 and beyond, and contact us to discuss how our advisory team can support your floor plan process.

Learn more about automotive floor plan financing.

A Perfect Storm

Financial markets thrive during times of predictability and conversely, lending institutions ratchet up their lending criteria when key factors are uncertain. In recent years, floor planning has been an ancillary source of profit for dealerships, but rising interest rates and inventory levels combined with no clear path forward have transformed floor planning into a significant cost and headache for dealers. No matter the financial landscape or market dynamics at play, DCG recommends these three floor plan best practices to support your business.

1. Think Beyond the Floor

Make floor plan decisions based on your overall financial situation. When considering floor plan options, account for your other loans and capital sources. The best lenders will offer terms that promote your dealership’s holistic financial health. Floor plans that siphon money away from your business will throttle your growth plans.

2. Connect Financing to Your Goals and Values

Floor plan options, capitalization loans, and goodwill financing should always align with your overall business goals and corporate values. Floor planning can be a method for growing your business and building your legacy, but only if you identify the right options from the best lenders. Recent trends of unpredictable rates and tightening lending practices create challenges for dealers navigating this aspect of their business.

3. Take Time to Consider Your Options

Floor planning is not the time to rush a decision. If you spend too little time considering your options, you risk agreeing to difficult terms and putting undue pressure on your team to sell cars unreasonably quickly. Connect with multiple lenders, compare floor plan options, and then make a decision that best supports your business growth.

Ford Updates its Floor Plan Assistance Program

Ford made news recently by updating its floor plan assistance program based on the input of its dealers. The new program launched on July 1, including an upfront credit of 1% of the sticker price for almost all retail vehicles.

 The previous floor plan assistance program launched in April 2022. It reimbursed floor plan interest charges based on how long any given vehicle remained in a dealer’s stock (up to 75 days). This previous iteration of the program was developed during a significant inventory shortage, and credits were worth only a small amount when dealers quickly sold vehicles. Now, under the new program, payments will be a set amount no matter how quickly a vehicle sells.

 The goal of this new program is to provide Ford dealers with flexibility that’s been lacking as market dynamics shifted after the implementation of the previous program.

DCG’s Automotive Floor Planning Advisory

At DCG, we provide advisory services for dealers seeking capital for floor planning. While we don’t purchase new cars for your business, we do walk alongside you during the floor planning process, using our experience and knowledge to help you make the best decisions. Here’s the process we use to support your floor plan needs:

 We assess your current inventory needs.

  1. We learn about your revenue, growth, and expansion goals.
  2. We explore your existing loans, mortgages, and goodwill financing.
  3. We create a roadmap for future floor plan costs.
  4. We compile offers from multiple lenders in our network.
  5. We present your options and highlight the most attractive terms and conditions.

 The result is a process that moves as quickly as possible and an ultimate floor plan decision that aligns with your values and supports your business goals.

Get Support for Your Floor Plan Process

We work with dealerships across the country to support their financing needs and business growth goals. The knowledge and experience we gain from these engagements are invaluable to our clients who want to make the best possible floor plan decisions.

 Are you looking for help with floor planning? Learn more about our services and schedule a brief consultation here.