Finding success in a market as competitive as used auto sales is no easy feat. There are so many players ranging from small, independent dealerships to large, nationwide chains and online platforms. As a result, standing out and securing good deals requires more than just traditional sourcing methods. That’s why non-auction purchases, like trade-ins and private sales, are so valuable and open up a world of opportunity.
But did you know you could unlock even more value by adding non-auction purchases to your AFC floorplan? Let’s take a look at the benefits of expanding your inventory sourcing strategy and how flooring these non-auction purchases can enhance your financial flexibility and boost your inventory.
What are non-auction purchases?
A non-auction purchase typically refers to a vehicle that is purchased by a dealer from any source other than a traditional physical auto auction or a digital auction/online marketplace. These purchases can come from a variety of sources, such as:
- Trade-Ins: When customers buy a new car, they often trade in their old vehicle. This is a primary source of used inventory for many dealers. It allows for direct negotiation with the customer and can provide better margins than auction purchases.
- Private Sellers: Dealers can purchase vehicles directly from private sellers. This might involve advertising to buy cars, using online marketplaces, or leveraging social media platforms to find sellers.
- Online Marketplaces: Beyond sourcing from the general public, dealers can use online platforms like Craigslist or Facebook Marketplace to find auto inventory purchase options in or near their communities.
- Wholesalers: Building relationships with wholesalers can provide a steady supply of vehicles. Wholesalers typically purchase vehicles from various sources, including auctions, but they also acquire inventory through trade-ins, lease returns, and other channels.
- Fleet Purchases: Buying from companies that are selling off their fleet vehicles is another avenue. These can be corporate fleets, rental car companies, or government vehicles.
But non-auction purchases can also refer to vehicles purchased at an auction, and then later added to a dealer floorplan. While all floorplan lenders have their own terms and conditions, companies like AFC can help dealers floor current inventory after acquiring it, using the unit as collateral.
Why should dealers floor their non-auction purchases?
The primary advantage of flooring non-auction purchases is the boost to a dealership’s cash flow. By potentially not having to pay the full price upfront for inventory, dealers may be able to maintain a higher level of liquidity on their books. This liquidity can be used for other operational needs, such as facility improvements, marketing, or expanding the business.
Incorporating non-auction purchases into a floorplan line of credit can also serve as a risk mitigation strategy. The inventory at a dealer auction can fluctuate, both in availability and cost. By diversifying inventory sources, dealers can stabilize inventory levels and costs, allowing them to protect the dealership from market volatility and ensure a more predictable business model.
Lastly, another great reason to floor non-auction purchases has to do with lienholder payoff. Any time a used vehicle is financed, it creates a lien on the car’s title, which is typically held by the lender. If the vehicle is sold again before the loan is repaid, the lienholder must be compensated before the title can change hands.
This process can be complicated, and it can tie up time and cash alike for a dealer. This is why some floorplan companies offer lien pay services to make things a bit easier. For example, AFC’s Lienholder Payoff Service verifies payoff, assists in remitting funds, and follows up on titles on the behalf of dealers.
BONUS RESOURCE: What is an auto lienholder?
Floor your non-auction purchases with AFC’s dealer financing
If you’re ready to get more from your dealer floorplan, there’s no better place to start than with your AFC. We floor vehicles from 1,300+ inventory sources, including whole car, salvage, rental fleet, powersport, RVs, and ride-share fleet.
Start your application today for dealer floorplan financing from AFC!
Disclaimer: Descriptions of AFC floorplans are for illustrative purposes only. Terms of AFC floorplan financing are subject to a final written agreement acceptable with AFC. AFC does not guarantee any results for floorplan financing and examples are for illustrative purposes only. Dealers should consult their own advisors to make independent business decisions regarding floorplan financing.
“AFC” refers to Automotive Finance Corporation, Automotive Finance Canada Inc., and AFC Cal, LLC in their respective jurisdictions. All California transactions are through AFC Cal, LLC. California loans will be made pursuant to Department of Business Oversight California Finance Lenders License. Canadian transactions are through Automotive Finance Canada Inc.
