Three Keys to Help Reduce Truck Dealership Floor Plan Costs

Floor plan financing is necessary for running a truck dealership. It allows dealers to stock a selection of new and used trucks at their locations for immediate delivery. The trucks themselves serve as collateral for short-term loans. Once the dealer sells a unit, they pay off the loan for that truck.

How much floor planning will cost a dealer depends on the loan's interest rate and the length of time the asset sits on the dealer’s lot.

The first step to reducing floor planning costs is to find a finance source that offers customized terms that meet your needs. No two dealerships are the same, so no two financing plans for floor planned trucks should be the same.

While floor plan financing is a necessary cost of doing business, it still needs to be managed to keep costs as low as possible.

Make Strategic Decisions

Another way to manage floor plan costs is to be very strategic in the number of new trucks you order that aren’t customer-specific orders. While truck dealers need to have some new units available, unlike car dealers they don’t typically sell off the lot and thus don’t usually have many new units on hand.

Also, be very deliberate in the types of new trucks you purchase. Review the past top sellers at your location and where customers are in their trade cycles. If you know a customer is close to a typical trade-in cycle milestone, purchase a new truck or two that closely matches their existing specs. In addition, conduct market research to see what types of trucks are selling in your area of responsibility.

The growth of e-commerce and a reduction in the average length of haul could be signs that you need to change the types of trucks you have on your lot. You could add some day cabs for regional haul or medium-duty box trucks for local delivery.

Turns Matter

The best way to turn new inventory and therefore reduce floor plan expenses is to have the trucks on your lot that fleets want to buy.

Regardless of the number of new trucks the dealer has, the longer a truck sits at the dealership unsold, the more it costs the dealer. When it comes to floor plan, average days to turn is a key metric. Track the date the truck first arrived at the dealership and then consult with the Sales staff about how much interest potential buyers have shown in the truck. Once you’ve identified a slow-moving unit, feature it prominently on the new truck section of your website. Choose language to describe its features that’ll attract the most interest.

You also can tie sales incentives to trucks that’ve been on the lot for longer than you’d like. If all else fails, consider reducing the price of the truck. Do the math to see at what price point you’re still making a profit on the deal but remember to factor in continued floor plan financing costs.

Used Trucks Need Special Treatment

Dealers also may need to use floor plan financing on their used trucks. Many times, dealers will have to take a truck in trade to make a new sale. Used truck market values are based on supply and demand so it’s important to know used truck sales trends in your area. Just because you take a truck in trade doesn’t mean you have to retail it from your dealership. Other ways to dispose of used trucks include swapping them with another dealer, wholesaling them or selling them at auction.

With used trucks, it’s even more critical to monitor how long the truck has been on the lot. But before putting it on the lot, ensure you correct any mechanical and operational problems with it and that it’s clean inside and out.

Many individual and fleet used truck buyers shop online before stepping on a dealer’s lot. How you write up a used truck on your website will directly impact how quickly it sells. Write up the trucks in a way that allows them to stand out from similarly spec’d trucks so that they don’t seem like all the other available trucks. Leverage social media to spotlight your used truck inventory.

When it comes to positioning the inventory on the lot, think about which trucks you want to sell first. Keep in mind that the longer a used truck sits in inventory, the harder it’s to sell. Rotate the used truck display regularly to keep it fresh.

Managing floor plan costs is largely blocking and tackling — executing on the fundamentals. Reducing floor plan costs is a numbers game that includes the truck purchase price financing interest rate, unit turn time, holding costs and more.