How dealer floor plans actually work — and where they quietly eat your gross

A floor plan is how most independent lots stock inventory without tying up $100,000 in cash: a lender fronts the purchase price at the auction, you pay interest by the day, and you pay the loan off when the car sells. Simple in concept. In practice, the mechanics — curtailments, audits, fees, the per-diem clock — are where dealers quietly lose two or three points of gross without noticing. Here's how it actually works, from someone who floor plans his own cars.

The basic machine

You get approved for a credit line — say $100,000 — with a floor plan provider. At the auction, instead of paying cash, the purchase goes on the line. The lender holds the title. From that moment, three clocks start:

1. The interest clock. You're charged interest daily on the amount advanced. On a $10,000 car at 9% APR, that's about $2.50 a day. Sounds small. It isn't — more below.
2. The curtailment clock. Most plans require you to pay down principal at set intervals — commonly around 10% of the advance at day 30 or 45, another chunk at 60 or 90, full payoff by 120 or 150. Miss a curtailment and you're in default territory.
3. The audit clock. The lender periodically sends someone to physically verify that every floored car is on your lot. A car that's sold but not paid off — or worse, off the lot with no explanation — is called being "out of trust," and it's the fastest way to lose your line and, in bad cases, end up in litigation.

The real per-car math

The APR is the number everyone quotes and the smallest part of the real cost. The full stack on a typical $10,000 unit:

• Interest: ~$2.50/day at 9% — $150 if the car sits 60 days
• Floor fee / origination: many plans charge a flat fee per floored unit, often $40–$100
• Curtailment payments: not a cost, but a cash-flow hit — 10% of principal due whether or not the car has sold
• Audit and admin fees: small, recurring, and they add up across a full floor

Call it $250–$350 all-in on a 60-day turn. If your target front gross is $1,800, the floor plan just took 15–20% of it — and that's a normal outcome, not a bad one. A car that drags to 120 days can eat $500+ before recon and lot costs. Run your own numbers in the floor plan calculator — it breaks out interest and fees by days held.

Where dealers actually get hurt

Aging inventory on borrowed money. The floor plan converts "this car isn't selling" from a nagging feeling into a daily invoice. The discipline that follows: know your per-diem on every floored unit, and when a car hits day 45 without serious interest, reprice it hard. Holding out for full gross on a floored car is often just donating the difference to your lender.

Curtailments as a surprise. The 10% payment at day 30–45 comes due in cash. Dealers who floor ten cars in a good buying week discover a five-figure curtailment bill the next month. Map curtailment dates when you buy, not when the notice arrives.

Sold-but-not-paid-off. You sell the car Tuesday, the buyer's bank funds Friday, and the floor plan expects payoff within days of sale. Sloppy back-office timing here is how honest dealers end up flagged out of trust. When the deal funds, the payoff goes out — same day.

Treating the line as profit. The line is inventory capacity, not income. Lots that use floor plan proceeds to cover payroll die suddenly and predictably.

Who the providers are

The big national names for independents are NextGear Capital (Cox), AFC (OPENLANE/KAR), Westlake, and the auction-attached plans from Manheim and OPENLANE. Published APR ranges run roughly 6.5% to 13% in 2026 depending on provider and your file — but the fee structure and curtailment schedule matter as much as the rate. We compare them head-to-head in NextGear vs. AFC vs. Westlake.

The habits that keep a floor plan cheap

1. Know the all-in daily cost per unit — interest plus amortized fees — and write it on the deal jacket mentally, if not literally.
2. Buy for velocity. A floored car that turns in 25 days at $1,600 gross beats one that "should" make $2,400 and sits for 90. (More on that in buying wholesale the right way.)
3. Reprice on a schedule, not on a feeling — day 30 and day 45, automatically.
4. Reconcile weekly. Every floored VIN, its age, its curtailment date, its payoff status. Five minutes a week prevents the audit-day scramble.

That last habit is exactly what your DMS should be doing for you — DealerVLO tracks acquisition cost and days-on-lot per unit, so the "what's aging and what's it costing me" question is a report, not a spreadsheet project.