Floor plan financing means that the manufacturer, or its finance arm, Chrysler Credit, sells new cars to the dealers, on credit. The cars are sent to the dealers "in trust." When the dealer sells a car that it has floor planed financed, it removes the car from trust, turnes it over to the has to buyer, and has to immediately send Chrysler Credit (or GMAC or Ford Motor Credit) cash for the vehicle, or the buyer's promissory note, if the buyer meets certain credit requirements.
Something you usually see when the economy turns bad, is dealerships that get caught "out of trust." Meaning that they have sold vehicles to buyers, but have not forwarded the money to the floor plan financer. It can be a crime to be "out of trust," and it is certainly the sort of thing that can cause the finance company to put a dealership out of business.
I think you saw a bit of that in the movie Fargo. The wormy car dealership executive, William Macey's character, who set up a kidnapping of his own wife, had sold cars, but had not paid the floor plan financer. That was why he was desperate for cash. He had to pay off the very suspicious finance company before they showed up with a fleet of tow trucks and removed the rest of the dealership's inventory.
Yes, I fully understand the fundamentals of floor planning. I used to be in the consumer electronics business and did a lot of it myself. (I knew it was time to bail on the electronics business when I walked into Wal-Mart and they were selling one of my bestselling VCRs for $20 UNDER my wholesale cost.)
What I don’t understand is this cash fund they’re talking about being heavily withdrawn from. It sounds like—I could be way off here—the manufacturer, in addition to shipping cars on floor plan, has also made a fund available from which the dealers can draw “operating cash loans” of some sort?
MM
Had to pay attention to that movie, but eventually I worked all that out.
Except today no one really wants the fleet of cars sitting on the locks-—not even the finance company.
I’m in the market for a car and went to one dealer that had 21 copies of the model I’m looking at and had zero 2009’s on the lot. Said they “hadn’t gotten them in yet.”
Hmmm.
Right.