What Is Floor Plan Interest

With a floor plan the initial investment needed to buy a particular unit is a fraction of the vehicle s actual purchase price.

What is floor plan interest.

As soon as that vehicle sells to a consumer floor planning dealers have the ability to immediately realize profits pay back the initial value of the loan plus interest and fees and had the flexibility to keep their funds working for their dealership. What you don t realize is that like most new car dealers a floor plan was used to finance the cars. Interest rate floors are utilized in derivative contracts and loan. Business interest in excess of the limitation can be carried forward indefinitely.

Floor plan lending is a form of inventory financing for a dealer of consumer or commercial goods in which each loan advance is made against a specific piece of collateral. An interest rate floor is an agreed upon rate in the lower range of rates associated with a floating rate loan product. Account 076 interest floorplan is es tablished to record the interest charges on vehicles in inventory financed under the dealership s floorplan line of credit. Specialty lenders traditional banks and finance arms of manufacturers provide the.

Example 1 record the accrual of floorplan interest for the current month in the amount of 9 183.