ORLANDO, Fla. — Competition for floorplanning will continue to get tougher, said Mike Morgan, vice president of Floorplan Xpress, which provides floorplan financing for independent used-car dealers.
“When you look at floorplanning as a basic model, it’s a quick way to make a lot of money,” he told Auto Finance News at the National Auto Auction Association convention here Wednesday.
“We are all seeing a lot of competition, which gives dealers options,” he said. Captive finance companies have traditionally dominated wholesale lending to dealers, but banks and one relative newcomer, GM Financial, are taking floorplan share.
GM Financial launched floorplan lending in 2012, but it didn’t gain much business until it started offering prime loans and “full-spectrum lending” last year. Meanwhile, Ally Financial Inc., GM’s former captive, said its share of GM dealer new-vehicle inventory was 63% in the second quarter, down from 65% a year earlier.
At the convention, Morgan said more lenders and also auctions would increase floorplan business. In the long run, he predicted banks would quit first, when the economy eventually turns down.
“When a dealer goes bad, he goes bad fast,” Morgan said. “Banks are afraid of floorplanning, because when they see losses, the losses are big — in the millions — so they just pull away.”
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