Page 18 – NextGear Capital

Six Ways Independent Dealers Can Win in 2019

December 27, 2018July 20, 2021

Tips for the new year from NextGear Capital’s VP of Sales, Lisa Mackie

At NextGear Capital, we pride ourselves on being more than just a lender. Our top priority is giving you the capital and resources you need to maintain your dealership’s success. As we start 2019, we want to thank you for choosing us as your floor plan partner and share a few reminders on a few ways you can succeed in the new year.

1. Dash to Digital: Look for ways to use new digital tools to make your life easier and your business more efficient. Options such as Account Portal enable you to conduct business 24/7, day or night, on mobile devices or computers. Take advantage of them!

2. Insist on Faster Funding: Time is money and liquidity is critical. You shouldn’t be waiting days to get funding on trade-ins or dealer-to-dealer purchases. This year, we were thrilled to see dealers embrace our new Rapid Pay feature for non-auction purchases. As the new year approaches, evaluate your needs regarding your trade-ins and inventory acquisition strategy so you can buy more cars that your customers want and need.

3. Maximize Cash Flow: Tying up your dealership savings to buy vehicles restricts your cash flow. Consider using your dealership savings to invest in operations, and secure a line of credit from your lending partner to keep your funds from being tied up in depreciating inventory.

4. Stick to 60 Days or Less: Speaking of speed, inventory turn should also be a top priority. We know it can be tempting to hold onto a vehicle in search of a better deal, but costs can mount too. A good rule of thumb is to move your inventory within 60 days.

5. Look at the Total Value: It’s easy to concentrate on interest rates when looking at different financing options, and lose focus on the total value of your lending options. What additional fees are involved? What are the terms? What kind of service does the lender provide? That low rate might not be such a good deal when it comes to lackluster support and restrictions on the type and general condition of inventory you’re able to purchase.

6. Choose Partners, not Vendors: Partners, not vendors, are invested in your long-term success. Reflect on which partners not only deliver exceptional products and services, but also provide education, training and strategic advice. Ask for expert insights from your lenders to help improve your bottom-line.

Considering these reminders can help your business thrive in the new year. And, as always, we’ll be there every step of the way to help guide your business to peak performance.

3 Ways A Car Dealer Line of Credit Works For You

December 20, 2018July 20, 2021

Auto dealer talking to account rep about their NextGear Capital car dealer line of credit at auction

Maintaining cash flow and profitability can be a delicate balance without a floor plan. Unfortunately, buying cars with cash doesn’t allow for much flexibility because dealership funds are often tied up in inventory. When funds are tied up in inventory, you have to work harder to ensure stability with your cash flow and profitability. Consider three different ways that a car dealer line of credit can help make your funds work for you.

Free Up Your Funds
Running a dealership takes a significant amount of capital. Not only do you need funds to purchase inventory, but you have to consider the amount of cash flow needed to maintain your office, lot and operations.

Let’s assume your dealership purchases inventory that can be bought at auction for around $6000 per car, and you can sell 15 of those vehicles per week. Just to maintain inventory levels, your dealership needs approximately $90,000 just to keep enough inventory on your lot! That’s a lot of money that could be spent elsewhere to sustain or maintain your dealership operations.

With a floor plan, dealers can purchase $90,000 in inventory on a line of credit all while keeping extra capital liquid. Plus, until a vehicle has sold, dealers only owe minimal payments. Once the vehicle sells to a consumer, dealers can immediately pay off the loan amount and realize profits all while keeping funds on hand for other expenses.

Stay Attuned To Turn Times
It can be easy to lose track of how long a particular vehicle has been on a dealership lot, especially when it’s been purchased with cash. Accumulating aged inventory and the subsequent holding costs can seriously affect dealership profitability.

Dealers with a floor plan often aim to have their contracted terms match up with their aged inventory exit strategy. For example, many dealers use their second floor plan payment notification to trigger a vehicle evaluation and determine next steps. If the vehicle doesn’t sell within the next few days, should it be taken back to auction, or sold to a wholesaler? Was it a bad purchase? Taking a second look at a unit can further help dealers make proactive, rather than reactive, decisions.

Focus on Building Your Business
Developing a successful dealership can take a lot of time and effort. Though every dealer will have to complete a variety of administrative tasks to keep things running smoothly, taking advantage of partner services can help dealers focus on activities that contribute to the overall bottom line.

For example, dealers that use a floor plan line of credit can often take advantage of provided title services. Instead of taking time out of your week to do title work after buying a vehicle at auction, a floor plan provider can do that on your behalf. Once a vehicle is sold, titles are quickly and simply delivered, giving you time to focus on other priorities.

A car dealer line of credit is tailored to assist dealership cash flow, help you focus on other priorities, and in turn assist your dealership profitability. Supplement your current cash flow with a NextGear Capital line of credit. Have more questions about floor planning? Contact a local representative to discuss what a floor plan could do for your dealership.

Items You Need To Use Floorplan Loans

December 13, 2018July 20, 2021

Cash flow is the lifeblood of any business and for automotive dealers, a floorplan loan is key to getting needed funds to buy inventory. However, there are a few key items dealers need in place before gaining access to a line of credit.

Established Credit History
Any lender will want to have information about an individual’s borrowing history before approving a line of credit. Lending any amount of funds can be a risk to the lender, and an established credit history can help ensure the likelihood of being paid back.

Dealer License
Each state has different requirements to become an auto dealer. Before applying for a line of credit, make sure that your dealer license is up-to-date and current. Most lenders and floor plan providers prefer to see an active dealer’s license with the correct dealership name to make sure it is legal for that entity to buy and sell cars.

Completed Credit Application
A lender’s credit application will most likely have a few basic questions geared towards getting your dealership’s basic information. Form fields like the dealership name, address, contact information are pretty standard. Lenders will also frequently ask for additional information on how your entity is structured, whether it’s a partnership, S-corp or LLC, and the amount of credit you’re looking to acquire.

Combined with credit history, these details will help lenders determine the line of credit amount they are able to offer.

Financial Documentation
Extra financial documents may need to be submitted, especially if you’re asking for a large loan amount for your dealership. Some of these documents can include balance sheets, income statements, maybe even a few years of tax returns.

Though it make take some time to get some of these items together, it will certainly make the process of getting a floorplan loan much easier. Apply now to start the NextGear Capital application process. If you have additional questions about our application process, we’ll get you connected to your representative.

How Floorplanning Cars Can Help Save You Time

December 6, 2018July 20, 2021

Dealer considering the difference between a floor plan and auto bank floor plan

Running a dealership of any size can be hectic, and any time savings are valuable. For the most part, auto dealers primarily start using a floor plan to use dealership savings for other expenses and to help improve overall cash flow. However, one of the auxiliary benefits of floorplanning cars are overall time savings. By using a floor plan, dealers have the opportunity to get more time back in their day in a few key areas.

Fewer Administrative Tasks
Dealers that purchase inventory with savings continually have to follow up on checks clear, and any additional paperwork associated with those purchases. With a floor plan, it’s simple to bid, buy and pay for inventory. After winning a bid, a floor planning dealer will essentially just tell the auction to put their vehicle purchases on their line of credit. Beyond transporting inventory back to a dealership lot, that’s all a dealer has to do!

Simplified Title Management
Managing titles is a daily task for a majority of dealers. After buying a vehicle with dealership savings at auction, dealers often have to take additional steps to ensure titles are handled. Floor planning dealers have the advantage of a partner that manages titles on their behalf. As a bonus, depending on the dealership’s state, additional title work can be requested.

Assistance Tracking Aging Inventory
One of the top detractors of overall dealership profitability is aging inventory. The longer a car stays on a dealer’s lot, the more it depreciates and the more resources are spent to keep the vehicle on the dealership lot. If vehicles sit for too long, they can cease to become profitable for dealers.

With a floor plan, the small, periodic payments on a particular unit will often serve as a reminder to dealers put additional focus on selling that vehicle, or taking it through an inventory exit strategy.

When time is your most valuable resource, don’t exhaust it on activities that don’t contribute to your bottom line. Apply for a line of credit or reach out to one of our representatives to learn more about how floorplanning cars can help you save time.

Why Get a Flooring Financing Plan?

November 29, 2018July 20, 2021

dealer considering using a flooring financing plan to purchase vehicles

A flooring financing plan not only lets dealers stock their lots with more inventory, but it reduces time spent on administrative tasks, improves cash flow and provides opportunity for cash to work on the dealership’s behalf. Consider how a floor plan can assist in these primary areas.

Purchase More Inventory
A key reason dealers use a floor plan is to stock their lot with additional inventory. With thinning margins and fewer opportunities to make gross on vehicles, dealership profitability often relies on volume, meaning dealers frequently have to sell more vehicles faster for adjusted prices to make the same profits. When dealers stock more inventory, they create extra opportunities to draw in customers with different vehicle varieties, and consequently have better chances of making more sales.

With a floor plan, dealers have the enhanced ability to purchase inventory at needed volumes to help secure profitability.

Enhanced Cash Flow
It can be difficult for dealers to acquire the cars needed to maintain and sustain profitability, especially if they don’t have enough capital. Beyond just finding in-demand vehicles, the cash flow needed to purchase additional inventory can be surprising.

Let’s say a dealer has $50,000 in cash available for operations and inventory. If they set aside $10,000 to cover operations and emergencies, that only leaves $40,000 for inventory. Even buying more affordable inventory at $3000 per unit leaves dealers buying a maximum of 13 units, and less for higher priced vehicles.

The extra buying power afforded by a floor plan ensures that dealers can buy a reasonable amount of in-demand inventory without depleting dealership savings.

Get Time Back from Administrative Tasks
Dealers that use their savings to purchase inventory often have to handle a variety of administrative tasks along with the responsibility of bringing a new vehicle to their lot. For example, not only do dealers have to keep tabs on their checks clearing, but also have to handle the logistics and paperwork that come with vehicle titles.

Floor plan financing providers can essentially eliminate some of these organizational duties. It’s simple to buy a vehicle at auction and put it on a floor plan. Additionally, auctions will often work directly with the floor plan provider to ensure titles are handled properly.

Still unsure about getting a floor plan? Connect with one of our representatives to learn more about how a NextGear Capital line of credit could enhance your cash flow and current operations.

Maintaining Profits With a Floor Plan Loan

November 21, 2018July 20, 2021

Cash flow is typically the lifeblood of any business. Though there are many factors that play into a dealer’s profitability, the dealers that consistently manage their operations and their floor plan loans have much better chances of success. Dealers that command a few key items in their dealership operations are in a much better shape to maintain overall profitability.

Manage Your Inventory
The infusion of funds from a floor plan loan shouldn’t cloud proper inventory management. It’s crucial to have a handle on your inventory management processes. Aged inventory can build up quickly, and unless responsibly handled, can become a suck on dealership resources. Every vehicle that comes to your lot should have an aged inventory exit strategy, with options to recoup costs at regular intervals.

Additionally, consider the types of vehicles that are in-demand in your market. Use data from tools like Stockwave to get an idea of demand. Buying with your gut doesn’t mean you won’t earn profits, but making decisions on inventory backed with reliable data gives your dealership better chances for results.

Make Moves to Sell Inventory Quickly
Ever thinning margins mean dealers can’t delay to get inventory on the lot, online, or hold out for top prices for particular vehicles. Profits are often made based on the volume of vehicles sold. Ensuring the little things in your operation run smoothly can be the difference between a successful and unsuccessful dealership.

For example, how long does it take to get vehicles retail-ready on your lot? When you buy inventory at auction, how many days does it take for a vehicle to get posted to your digital retailing platforms? Any efforts dedicated to getting your vehicles in front of consumers faster enhances chances that your inventory will turn quickly.

Control Your Floor Plan
When you first get a floor plan line of credit, it can be tempting to bring a lot of new inventory to your lot. However, it’s crucial to floor plan responsibly. If you purchase vehicles and they haven’t sold by the time your floor plan bill is due, you could be looking at a pretty serious bill. Spread your inventory purchases out over a period of time to ensure payoff dates occur at appropriate intervals.

Additionally, there are often other floor plan expenses you can avoid. Every floor planning company charges various fees. However, you can often avert some of those charges. For example, NextGear Capital dealers have the ability to avoid a variety of fees by enrolling in AutoPay.

It’s not always easy to keep your operations and inventory management in line. However, any steps your dealership takes toward a smoothing overall operations ensure you’re in a much better place to maintain profitability.

Take Charge of Your Audits with Self Reconciliation

November 15, 2018June 19, 2019

NextGear Capital’s Self Reconciliation solution was built to give dealers more control over the auditing process. With the power to reconcile units from the palm of your hand, soon you can begin accounting for vehicles on your lot, your way.

Most floor plan financing companies have an auditing process in place to protect the funds allocated for dealer’s retail or wholesale inventory. On occasion, there are scenarios where a vehicle isn’t immediately available for an auditor. When that happens, dealers have a contractually determined time frame to reconcile the outstanding units.

Though audits and reconciling units are a fundamental part of the floor planning process, they shouldn’t take up more time than necessary. NextGear Capital dealers gain access to a first-rate mix of audit flexibility, functionality and convenience with recent updates combined with a number of other audit process improvements

Extra Visibility with the Account Portal MyAudits Tab
Keeping track and clearing units from your dealership’s lot shouldn’t be a hassle. With the MyAudits dashboard located within Account Portal, dealers have even more visibility and transparency over the vehicles on their floor plan that need to be reconciled.

Clear Audits Quickly and Simply
Account Portal improvements will soon give dealers the ability to clear audits in real time. All dealers essentially have to do is log in to Account Portal, then take and upload 4 images from inside the platform. That’s it! Vehicles are cleared in real-time so additional follow up isn’t needed.

A Streamlined, Transparent Auditing Process
The extra transparency from the MyAudits tab combined with Account Portal’s new Self Reconciliation functionality mean that only a few key steps are needed to complete an audit.

Plus, with consolidated notifications, reduced account locks, extended reconciliation time and the ability to advise on preferred audit scheduling, dealers have fewer interruptions and more control over an auditing process that doesn’t interrupt business operations.

Fewer pictures, fewer steps and reduced interruptions plus real-time clearing highlights one of the most flexible auditing processes in the industry. If you have questions about our auditing process or Self Reconciliation and how it plays into floor planning, please contact us with your questions!

5 Traits of Healthy Auto Floor Planning Dealers

November 8, 2018July 20, 2021

Every dealer uses a few different metrics to evaluate the success of their business. A floor plan is a crucial part of your dealership’s operations, and there are a few key characteristics that indicate the condition of your auto floor planning account. Consider monitoring the following metrics to get a full view of your dealership’s overall health.

Turn Times
One of the key measurements of a healthy dealer is their average turn time, or annual inventory turn. How many times per year can your dealership sell out your entire lot? Most dealers typically turn inventory approximately every 60 days to avoid accumulating aged inventory.

On-Time Payments
Though it may seem like a basic tenet of running a business, making payments on time is a key indicator to a floor plan lender that you’re operating a healthy dealership. For NextGear Capital dealers, enrolling in AutoPay allows you to always pay on time and avoid late fees!

Utilization
Healthy floor planning dealers consistently utilize their floor plans to purchase the inventory their market demands, and keep their credit usage at appropriate levels. Typically, we recommend a floor planning mix of 70/30 of a dealer’s floor plan and cash on hand to ensure dealer overhead is covered.

Communication
The dealers that invest in an ongoing relationship with their floor plan lender get more than just a line of credit. Staying connected not only helps you to fine-tune your floor plan management, but it also opens the door to discussion of your dealership’s strategy, and suggestions to improve overall outcomes.

Consistently Cleared Audits
Most floor plan companies have an auditing process to ensure the funds supplied to dealers is used for vehicle inventory. On occasion when an auditor stops by, dealers will have a few units unavailable because they’re off-site getting repaired or reconditioned. The dealers that keep careful records of the location of these off-site units and have the ability quickly reconcile them, build additional trust.

Based on these traits of a healthy dealership, how does your dealership stack up? Do you see gaps in your relationship with your floor plan provider?

If you aren’t satisfied with your current dealership’s current numbers or auto floor planning relationship, contact us or reach out to a NextGear Capital representative. We’re dedicated to providing your dealership with buying power and partnership to help you succeed and thrive.

How Much Should you Stock on your Dealer Floorplan?

November 1, 2018July 20, 2021

Maintaining dealership profitability relies on dealers to continually balance their inventory and cash flow. With a floor plan, dealers have more cash flow to stock their lots with needed inventory. However, what’s the optimal amount of inventory that should be purchased on a dealer floorplan?

First, take a look at your dealership’s key performance metrics including floor planning numbers, sales and average turn times. How much inventory do you currently sell per month? How much inventory would you like to sell per month? Be sure to select a realistic sales goal.

Then, consider how quickly your dealership turns inventory. If you turn inventory every 60 days, you completely sell your lot’s inventory 6 times per year. For dealers that turn inventory every 40 days, you’d turn inventory 9 times per year.

Let’s work through an example to figure out how much inventory an example dealer should stock on their lot.

If our example dealer wants to sell 30 cars per month, or essentially one car per day, that dealer has a desired sales goal of 30 cars. Simple enough, right? We also assume that this dealer currently has an average lot turn time of 60 days. So their lot gets turned 6 times over the course of the entire year. To figure out this dealer’s optimal inventory level, we take the number of monthly desired sales, divided by the dealer’s lot turn time, times the months in a year.

Monthly Desired Sales	30
Total Yearly Lot Turn (Assuming a 60 day average turn time)	÷ 6
Months in the Year	X 12
Optimal Inventory Stocking Number	= 60 Units

In this scenario, our dealer should aim to have approximately 60 vehicles on their lot.

Plug in your dealership’s current numbers. Do you have the right amount of inventory currently in stock?

Keep in mind that the ability to purchase your calculated optimal amount of inventory will depend on the amount of dealership savings you have on-hand, or the line of credit your dealership is approved for.

Regardless of the amount of credit your dealership is approved for, be sure to floor plan responsibly. At NextGear Capital, the recommended mix of a dealer floorplan and cash on hand is 70/30, respectively. Plan to keep a balanced amount of extra credit and cash available to ensure your dealership overhead is covered.

Keeping the right amount of inventory on your lot is crucial to balancing your dealership’s overall cash flow. If you’re concerned your dealership doesn’t have the right balance of inventory and cash flow, contact us or reach out to a local representative.

How Automotive Floorplans Enhance Your Cash Flow

October 25, 2018June 20, 2019

Keeping your dealership in business isn’t easy, but you love the work. You find in-demand cars with decent margins, and your customers are satisfied with their purchases and your additional services. However, you frequently find yourself struggling to pay all the bills and purchase that next unit at auction. Cash flow is key to maintain dealership success, and one of the best ways to obtain extra funds is to use automotive floorplans.

The more vehicles that sell, the more cash flow you need; especially considering the extra time it often takes for a customer’s lender to pay you.

Think of it this way. Let’s assume a dealer sells 6 vehicles per week and spends an average amount of $10,000 cash per vehicle. To keep cars on the lot, this dealer needs an average of $60,000 per week just to maintain current inventory levels. Additionally, any extra time it takes for a customer’s lender to pay further compounds this dealer’s cash flow needs.

If it takes three weeks for a customer’s lender to pay, that’s $180,000 in needed cash flow just to maintain inventory. That doesn’t include other expenses or payroll either.

Plus, when you add in the variables of cash-bought inventory, holding costs and depreciation, a dealer’s need for additional cash flow becomes even more apparent.

The NADA estimates that the cost of holding on to a vehicle and letting it sit on a dealership lot is about $28 per day. If a dealer purchases inventory in cash for $8,000 and hopes to sell it for $10,000 and it sits for 30 days, they will have essentially spent $8,840 just to let the vehicle sit on their lot. Additionally, when and if that vehicle sells, there’s not a lot of room for those profits to pay for expenses.

That’s just one vehicle. Consider how much capital is tied up in inventory when applying this scenario to an entire dealership lot.

By using a floor plan, dealers will be able to see profit almost immediately. If that $8,000 piece of inventory sells to a consumer for $10,000, dealers can pay off the original loan value plus any fees, all while having the flexibility to use dealership capital for other expenses.

Grow your cash flow and build a thriving dealership with the help of a floor plan line of credit. Contact us to find out how a NextGear Capital floor plan can help supplement your dealership’s current cash flow.