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 is floor plan interest.

A business can deduct its business interest only to the extent of the sum of its business interest income 30 of its adjusted taxable income and its floor plan financing income. Interest rate floors are utilized in derivative contracts and loan. 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. Example 1 record the accrual of floorplan interest for the current month in the amount of 9 183.

With a floor plan the initial investment needed to buy a particular unit is a fraction of the vehicle s actual purchase price. An interest rate floor is an agreed upon rate in the lower range of rates associated with a floating rate loan product. Specialty lenders traditional banks and finance arms of manufacturers provide the. 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.