Floor plan financing is
multi-billion dollar industry and a key element of the auto
industry in Canada. This type of financing is in effect short term
inventory financing for both new and used car dealerships. The
financing allows a dealer to carry sufficient inventory to satisfy
customer needs and demands.
The average term for a car being on a dealership lot tends to be up
to 90 days. The floor plan financier registers liens on each
vehicle and when the vehicle is sold, that lien is removed. Lenders
must have reasonable confidence in the financial viability of the
dealer. Dealers also are subject to rigorous audits of the
inventory. The lender wants to know the car is still there and
hasn't been sold and not paid for of course. Therefore VIN's are
checked regularly by finance company personnel, insurance is
validated, and random inspections are common.