Posts Tagged ‘Floorplan Financing’

There is no doubt that car dealers have been going through difficult times in 2008.  This has been a year for testing the strength of car dealers and the dealers that survive will prove to be well-capitalized and well-managed.

Although the used car business has been going through a recession, the franchise dealers have been experiencing a depression.  People that need to purchase a car have been keeping the market alive – it has been a “need” driven market as opposed to a “want’ driven market.  Dealers that have catered to this “need” market have performed, while the new car dealer in the “want” market has experienced difficulty.

The used car dealer has far less overhead than a new dealer and has the flexibility to react to changing inventory needs – this dealer has absolute discretion in what inventory he purchases.  The used car dealers that have that have capitalized these strengths have the management skills to do well in years to come.

We believe Dealers First Affiliates effectively demonstrates a more secure means of reentry into this market for local lenders. Our business model offers a simple and fair way of doing business, and the accessibility and appeal of a hometown setting encourage strong, long term relationships with dealers. Our computer software provides both lender and dealer with concise, pertinent information and can enable you to create a highly competitive profit center within your organization.

Technorati Tags: Floorplan Financing

Lender also restores retail financing to subprime customers

Donna Harris
Automotive News
April 1, 2009 – 10:16 am ET
UPDATED: 4/1/09 12:39 p.m. ET

In a sharp reversal, GMAC Financial Services said today that it has backed off a tough new inventory repayment policy on aging new vehicles and has agreed to resume subprime lending.

GMAC also said it is pumping $5 billion more into consumer auto loans over the next 60 days.

The initiatives are designed to boost auto sales and help keep struggling dealers afloat, said GMAC President Bill Muir.

“Dealers have told us that cash flow is critical right now,” Muir said in a statement. “We want to do everything possible to help dealers sell their inventory of cars and trucks, while preserving their working capital during the next couple of months.”

Eliminating dealer curtailments

GMAC said it immediately will eliminate all dealer curtailment payments for older new-vehicle inventory during April. Curtailment is a standard industry practice accelerating the payoff of inventory in stock for an extended period.

In January, GMAC said it would increase the amount it charged dealers to keep some aging new vehicles on their lots. The accelerated payment schedule began in March and applied to new vehicles with model years of 2007 or older and new 2008 vehicles financed before Sept. 1, 2007.

GMAC also is waiving fees it charged dealers to post older vehicles on SmartAuction, GMAC’s online remarketing site, through June. The waiver is designed to help dealers clear their lots of older vehicles.

And the company is letting some dealers postpone interest charges on inventory financing for two 30-day periods over the next 120 days. Dealers can start the deferral program beginning with their interest bill for March. The payment for deferred interest will be due 90 days after the month the charges are postponed.

The program “can be a significant temporary boost to cash flow,” Muir said. “Our goal is to ease the burden on dealers over the next few months as they work hard to lower costs, reduce inventory and protect their financial stability.”

Return to subprime

GMAC is getting back into subprime lending, agreeing to extend credit to retail customers with credit scores below 620 — on a limited basis. These customers still will need to qualify for financing, GMAC said in its announcement. It did not specify those requirements.

In October, GMAC introduced a minimum credit score of 700. After receiving federal aid in January, the lender lowered the minimum score to 620, the conventional cutoff below which customers are considered to have risky credit. But the company announced it would shut down its subprime subsidiary, Nuvell Financial Services.

GMAC also is increasing advance rates for car loans with terms of 60 months or fewer. The advance rate is the amount lenders are willing to lend, often expressed as a percentage of the vehicle’s sticker price.

The company said nothing about auto leasing in its announcement. Dealers have said GMAC’s withdrawal from leasing has substantially hindered auto sales.

“GMAC now finances a broad spectrum of auto buyers,” Muir said. “Through March, we financed over $2 billion in new and used retail auto contracts. We want to do our part to support the U.S. auto industry and individuals in the market for a car or truck.”

In December GMAC received a $6 billion government bailout that required GM and the private equity firm Cerberus Capital Management LP to slash their stakes in GMAC. GM’s stake was 49 percent and Cerberus’ 51 percent.

GMAC, now a bank holding company with operations in North America, South America, Europe and the Asia-Pacific region, had $189 billion in assets on Dec. 31.

Reuters contributed to this report

All I can Add, It’s about time…

Technorati Tags: floor plan financing, Floorplan Financing, GMAC, Inventory Financing

What is Floor Planning? aka Floor Plan Financing

Short-Term Financing Generally speaking, floor planning is a term used for financing inventory in retail operations. Regarding vehicle dealerships, floor planning is specifically involved in the short-term financing of inventory. Lenders typically provide funding for an amount of time (usually 30-90 days) for each vehicle on the dealer’s premises. The vehicle title acts as the primary collateral and the most common practice for floor plan lenders is to be in physical possession of the title until the loan is repaid. Typically, rates and fees applicable in this lending field are high because of transaction costs and collateral risk.

Industry There are a number of national companies that dominate the industry with relatively few lenders offering programs at a local/community level. While banks have engaged in this type of lending in the past, most internal procedures are unsuited for managing collateral on a per entity basis. These banks have traditionally opted for line-of-credit relationships with franchised dealers without the ability or software to track individual titles and collateral items, thus increasing risk.  Furthermore, the propensities towards banking consolidation and other industry changes have further distanced banks from this local lending concept.

Local Opportunity We believe Dealers First Affiliates and its Tirekicker^TM software effectively demonstrates a viable means of entry into this market for great investment returns. Our business model offers a simple and fair way of doing business and encourages strong relationships with local businesses. Our computer software provides both lender and client with concise, pertinent information and can enable you to create a highly competitive profit center.

Technorati Tags: floor plan financing, Floorplan Financing

Diana Kurylko
Automotive News Europe
March 23, 2009 06:01 CET

MAHWAH, New Jersey — Jaguar and Land Rover executives say they are guiding dealers to alternative sources of floorplan financing, but those who are not approved by Chase Auto Finance ultimately are on their own.

Ford Motor Co., which sold Jaguar and Land Rover last June to Tata Motors for $2.3 billion (about €1.5 billion at the time of the sale), will stop inventory lending to the brands through Ford Motor Credit on June 1.

Since January, Chase has been providing retail financing for Jaguar and Land Rover dealers but is handling floorplan financing with dealers on an individual basis.

Sharon Corrigan, vice president of retail operations for Jaguar Land Rover NA LLC, said dealers must “come to terms with and find their sources” of inventory financing.

Jaguar and Land Rover have 174 franchises each. A company spokesman said that only 80 were relying on Ford Motor Credit for credit.

“Of those, 52 have not yet achieved a new source of finance, and they are all working with other sources, including Chase,” the spokesman said in an e-mail. “We know banks that are lending money, and we are providing [the names of] those banks to dealers.”

In interview last week, top Jaguar and Land Rover executives said “virtually all,” dealers will find inventory financing.

Their optimism isn’t shared by the National Automobile Dealers Association. Last month, NADA asked the government to consider loan guarantees for dealer inventory financing.

“Even creditworthy dealers are having trouble finding access to any floorplan financing, or the financing available to them is being offered on terms that are not competitive and not commensurate with the risk,” according to an NADA fact sheet.

NADA says the average floorplan loan is about $4.9 million.

Full Story at Automotive News

Technorati Tags: floor plan financing, Floorplan Financing

By Nick Carey

LANSING, Mich., March 22 (Reuters) – Deep in the last stronghold of the struggling U.S. auto industry, Rosario Criscuolo says he owes the survival of his business to Toyota Motor Corp (7203.T).

“If it weren’t for Toyota, I’d be gone,” said the owner of Spartan Auto Group, which runs three auto dealerships selling Toyota, Lexus, Infiniti, Volkswagen (VOWG.DE) and Mazda brand cars. “Without them I’d be selling papers on the corner.”

To fund the $25 million worth of gleaming new cars at his showrooms, including here in Michigan’s capital, Criscuolo needs floorplan financing, or inventory loans.

Floorplan financing is the lifeblood of U.S. auto dealers because it allows them to pay for vehicles when they take delivery and carry them until they find a buyers. Full Article at Reuters

Technorati Tags: Floorplan Financing