Floor Plan Management: Minimize Days in Stock (2026 Guide)

Floor plan financing (wholesale financing) lets dealers stock inventory without tying up massive amounts of cash. Instead of needing $500,000 cash to stock 25 vehicles, you use a $500,000 credit line and pay interest only on vehicles while they're in stock. For dealers turning inventory every 30-45 days, floor plan interest costs $100-200 per vehicle—small price to maintain cash flow and buying power.

But floor plan becomes a profit killer when vehicles age beyond 60-90 days. A $20,000 vehicle sitting 120 days costs $400+ in interest (20% of a $2,000 gross profit). This guide explains how floor plan works, calculates true costs, and provides strategies to minimize interest expense through fast turnover and strategic curtailment.

How Floor Plan Financing Works

1. Basic Floor Plan Mechanics

Purchase Flow:

You Win Vehicle at Auction: Bid $18,000 on 2022 Honda Accord at Manheim auction.
Floor Plan Company Pays Auction: Your floor plan lender (NextGear, AFC, Ally, TD Auto Finance) pays Manheim $18,000 directly. You don't wire funds.
Vehicle Added to Floor Plan: $18,000 balance added to your floor plan account. Interest starts accruing (immediately or after free days expire).
You Sell Vehicle: Sell Honda Accord for $24,000 to customer. Collect payment.
You Curtail Floor Plan: Pay off $18,000 + accrued interest to floor plan lender within 24-48 hours of sale. Lender releases title to buyer.

2. Floor Plan vs Cash Purchase Comparison

Aspect	Floor Plan Financing	Cash Purchase
Upfront Capital Required	$0 per vehicle (lender pays auction)	$18,000 per vehicle (you wire funds)
Inventory Capacity	25-50 vehicles with $500k credit line	5-10 vehicles with $100k cash (limits growth)
Interest Cost (45-day turn)	~$150 per vehicle (6% APR)	$0 interest (but opportunity cost of tied-up cash)
Cash Flow	Cash freed for operations, payroll, marketing	Cash locked in inventory until vehicle sells
Risk of Aging Inventory	High—interest accrues daily, eats profit	Low interest cost, but depreciation + opportunity cost

Floor Plan Costs Breakdown

1. Interest Rate Components

Typical Floor Plan APR: Prime Rate + 2-4% = 5-8% APR

Prime Rate: Federal Reserve benchmark (3-5% depending on economic conditions)
Dealer Margin: 2-4% added by lender based on creditworthiness, term, volume
Effective Rate: 5-8% APR for established dealers, 8-12% for new dealers or lower credit

2. Daily Interest Calculation

Formula: (Vehicle Cost × APR) ÷ 365 = Daily Interest

Vehicle Cost	APR	Daily Interest	30 Days	60 Days	90 Days
$10,000	6%	$1.64	$49	$99	$148
$15,000	6%	$2.47	$74	$148	$222
$20,000	6%	$3.29	$99	$197	$296
$25,000	6%	$4.11	$123	$247	$370
$30,000	6%	$4.93	$148	$296	$444

3. Additional Monthly Fees

Account Maintenance Fee: $25-50/month flat fee (regardless of inventory count)
Vehicle Servicing Fee: $15-25/vehicle/month (per unit on floor plan)
Audit Fee: $0-150/month (some lenders charge for monthly audits, others waive)
Late Curtailment Fee: $50-200 per occurrence (if you sell vehicle but don't pay off within 48 hours)
Out-of-Trust Penalty: $500-2,000 + potential legal action (if you sell vehicle but don't pay floor plan within contract terms)

4. Total Cost Example (60-Day Turn)

Vehicle: $20,000 auction purchase, sold in 60 days
Floor Plan Terms: 6% APR, 30-day free, $20/vehicle/month servicing fee

Days 1-30 (Free Days): $0 interest + $20 servicing fee = $20
Days 31-60 (30 Days Interest): $99 interest + $20 servicing fee = $119
Total Floor Plan Cost: $139 (0.7% of vehicle cost)

Impact on Gross Profit: Sell at $24,000, cost $20,000, floor plan $139, recon $800 → Net Gross: $3,061

Free Days Strategy

Free days (curtailment period) = interest-free period before daily interest starts. Strategically using free days maximizes profitability on fast-turning vehicles while accepting interest costs on slower inventory.

1. Common Free Day Terms

Free Days	Interest Starts	Best For
0-Day Free	Immediately upon purchase	Lowest APR offered (typically 1-2% lower than 30-60 day free terms). Use if turnover is 20-30 days.
30-Day Free	Day 31	Balanced approach. If you sell in 30 days, zero interest. Moderate rate (5.5-7% APR).
45-60 Day Free	Day 46-61	Higher APR (6.5-8%) but great if you consistently turn inventory in 45-60 days. Most popular for independent dealers.
90-Day Free	Day 91	Highest APR (7-9%). Only makes sense for specialty dealers with 60-90 day average turn.

2. Curtailment Strategy by Vehicle Type

Vehicle Type	Expected Turn	Recommended Free Days	Rationale
High-Demand (Honda, Toyota)	15-30 days	30-day free or 0-day free (lower APR)	Will sell within free period—zero interest. Accept slightly lower APR in exchange for no free days.
Mid-Demand (Mainstream)	30-45 days	45-60 day free	Likely to sell within free period. Some interest on slower units acceptable.
Low-Demand (Older, Luxury)	60-90 days	60-90 day free	Accept higher APR to avoid interest for first 60-90 days. Minimize effective cost.

3. Curtailment Best Practices

Curtail Within 24-48 Hours of Sale: Floor plan contracts require payoff within 1-2 business days of sale. Late curtailment triggers penalty fees ($50-200).
Track Free Day Expiration: Set DMS alerts 7 days before free days expire. Decide: price aggressively to sell within free period OR accept interest cost.
Partial Curtailment Option: Some lenders allow partial paydown (pay $10,000 on $20,000 balance) to reduce daily interest. Use if vehicle sitting longer than expected but not ready to wholesale.
Out-of-Trust = Death Penalty: NEVER sell a vehicle and fail to curtail. This is "out-of-trust" and can result in immediate floor plan termination, legal action, and industry blacklist.

Floor Plan Cost Control Strategies

1. Fast Turnover (Primary Strategy)

Goal: Sell vehicles within 30-45 days to minimize interest accrual.

Price Competitively from Day 1: Don't test the market with high pricing. Price at or slightly below market median to generate immediate leads.
Aggressive Repricing at Day 30: If no leads by day 30, reduce price 5% immediately. Every extra day = $3-5 interest cost.
Wholesale at Day 60-75: If vehicle hits 60 days and no solid leads, get wholesale bids. Avoid 90-120 day aging where interest costs destroy profit.

2. Selective Floor Plan Use

Strategy: Floor plan 60-70% of inventory, pay cash for remaining 30-40%.

Floor Plan: High-demand vehicles (Honda, Toyota, Ford trucks) that will sell in 30-45 days. Maximize credit line for inventory that turns fast.
Cash Purchase: Slow-turning specialty vehicles, higher-margin units where you're okay with 60-90 day turn. Avoid interest cost on vehicles you know will age.

3. Interest Cost Tracking

DMS Reporting: Track monthly floor plan interest per vehicle and in aggregate.

Metric	How to Calculate	Target
Interest as % of Gross	(Total Interest ÷ Total Gross Profit) × 100	<5% (interest should be small portion of gross)
Average Interest per Vehicle	Total Interest ÷ Vehicles Sold	$100-200 for 30-45 day turn
Vehicles Exceeding $300 Interest	Count of vehicles with >$300 interest	<10% of monthly sales

4. Negotiate Better Floor Plan Terms

Volume Discounts: Higher inventory ($500k+ credit line) = better rates. Negotiate 0.5-1% APR reduction if you carry 30-50 units consistently.
Longer Free Days: Proven fast turnover (documented 35-day average) = leverage for 60-day free instead of 30-day free at same APR.
Waive Monthly Fees: Some lenders waive account fee ($25-50/mo) for high-volume dealers or dealers with multiple locations.
Shop Multiple Lenders: AFC, NextGear, Ally, TD Auto Finance, regional banks all offer floor plan. Get quotes from 3-4 lenders, use best offer as leverage.

Floor Plan Alternatives

1. When to Use Floor Plan

Inventory Scale: Stocking 20+ vehicles (requires $400k-1M+ capital)
Fast Turnover: Average 30-45 day turn (interest cost acceptable)
Cash Flow Needs: Need cash freed for operations, payroll, marketing, expansion
Growth Mode: Scaling from 10 to 30 to 50 vehicles (can't tie up that much cash)

2. When to Avoid Floor Plan (Use Alternatives)

Small Inventory (5-10 Vehicles): Floor plan fees + interest may exceed benefit. Use personal capital, HELOC, or business line of credit instead.
Slow Turnover (>60 Days): Interest costs eat profit on specialty/luxury vehicles. Pay cash or use alternative financing.
New Dealers (No Operating History): Floor plan companies require 1-2 years history + strong credit. Use alternatives until eligible.

3. Floor Plan Alternatives

Alternative	How It Works	Pros/Cons
HELOC (Home Equity Line of Credit)	Borrow against home equity at 4-6% APR	Pros: Lower rates, no vehicle servicing fees. Cons: Risk to personal home, limited to equity available.
Business Line of Credit	Revolving credit from bank (6-10% APR)	Pros: Flexible use (inventory, operations). Cons: Higher rates than floor plan, requires strong business credit.
SBA Loan (7a or 504)	Government-backed term loan (5-8% fixed)	Pros: Lower fixed rates, longer terms (10-25 years). Cons: Slow approval (60-90 days), requires collateral + personal guarantee.
Personal Savings	Use personal capital to buy inventory	Pros: Zero interest. Cons: Limits scale, ties up personal wealth, risk if business fails.
Consignment	Sell vehicles for others, take commission (20-30%)	Pros: Zero capital required. Cons: Lower profit per unit, limited control over pricing/presentation.

Frequently Asked Questions

What is floor plan financing for car dealers?

Floor plan financing (wholesale financing) is a line of credit used to purchase inventory. The lender pays the auction or seller directly, and you repay when the vehicle sells. Interest accrues daily (typically 5-8% APR) from purchase until payoff. Used to avoid tying up large amounts of cash in inventory—lets you stock 20-50 vehicles with $100k-200k credit line instead of $400k-1M cash.

How much does floor plan financing cost?

Typical rates: 5-8% APR (prime rate + 2-4%). Interest calculated daily from curtailment date (when free days expire). Example: $20,000 vehicle at 6% APR = $3.29/day interest. 30 days = $99, 60 days = $197, 90 days = $296. Add monthly fees: $25-50/month account fee, $15-25/vehicle servicing fee. Total cost for 60-day turn: ~$250-300 per vehicle.

What are 'free days' in floor plan financing?

Free days (curtailment period) = interest-free period before daily interest starts accruing. Common terms: 0-day free (interest starts immediately), 30-day free, 45-day free, 60-day free, 90-day free. Higher free days = lower effective cost. Example: 60-day free days means no interest for first 60 days. If vehicle sells in 45 days, you pay zero interest (only monthly fees).

Can I use floor plan financing as a new dealer?

New dealers typically need: (1) 1-2 years operating history, (2) Dealer license, (3) Personal guarantee + good credit score (680+), (4) Financial statements showing profitability or adequate capital, (5) Established business location (not operating from home). Start-up dealers often use personal credit (HELOC, business credit card, savings) for first 6-12 months, then apply for floor plan once established.

How do I minimize floor plan interest costs?

Five strategies: (1) Fast turnover (sell in 30-45 days to minimize interest accrual), (2) Use free days strategically (curtail high-demand vehicles within free period, let slow movers run longer), (3) Selective floor plan use (floor plan 70% of inventory, pay cash for remaining 30%), (4) Aggressive repricing at day 45-60 to move before interest costs eat profit, (5) Track interest per vehicle in DMS, analyze if certain vehicle types consistently exceed profitable interest threshold.

Track floor plan costs in real-time with DealerOneView. Automated daily interest calculations, free day expiration alerts, and per-vehicle profitability reports show exactly how much floor plan costs are eating into your gross. Identify aging inventory before interest costs spiral out of control.

Floor Plan Management: Minimize Days in Stock