Simply it is a way for an auto dealer to use a lender s funds to finance the cars and until each of them is sold the lender holds title to the cars.
What is floor plan financing interest.
So how does floor plan financing work.
Floor plan financing interest expense remained fully deductible under tax reform.
But it came at a cost.
Floor plan financing interest expense is not subject to the section 163 j limitation.
Floor plan financing interest expense is interest on debt used to finance the acquisition of motor vehicles held for sale or lease where the debt is secured by the acquired inventory.
Floor planning is a form of retailer financing for large ticket items displayed on showroom floors or lots.
What you don t realize is that like most new car dealers a floor plan was used to finance the cars.
Much like a credit card a floor plan financing company extends a line of credit to a car dealer.
Dealerships that take the floor plan financing interest exclusion in computing their limit can t claim 100 bonus depreciation for their fixed asset additions.
The money borrowed from the bank collects interest and one has the choice to either make a minimum payment or pay off the balance in full when the bill is due.