Your Floor Plan Isn't Just for the Auction: How to Floor Private-Party Cars

AFC, one of the largest independent floor plan lenders, says plainly that floorplan financing isn't limited to auction or online marketplace purchases, and that it can floor customer trade-ins, private-party purchases, dealer-to-dealer deals and units with lienholder payoffs for eligible dealers. NextGear Capital describes using its floor plan for trade-ins and "off-street" or non-auction purchases on qualified accounts, and tells dealers to contact their Performance Manager to get set up.

If your current lender won't floor private-party cars, that's worth knowing before you build a sourcing strategy around them. Every lender and every account is different; your dealer agreement and term sheet are the final word.

1. 1Confirm eligibility and the advance. Know the most your lender will advance on this car before you agree a price with the seller. If you pay more than the advance (and some lenders advance only 90% to 95% of cost), the difference comes out of your pocket.
2. 2Verify the title before you pay. The title should be in the seller's name, match their ID, match the VIN on the car, and carry no brand (salvage, rebuilt, flood). Find out whether there's a lien and who holds it.
3. 3Buy the car. Pay the seller directly if the title is clear, or pay off the lienholder first if it isn't (more on that below). Get a signed title, a bill of sale and the odometer disclosure your state requires.
4. 4Submit the funding request. Request funding through your lender's dealer portal and send the title the way they ask. NextGear, for example, says it provides prepaid overnight shipping for titles on non-auction purchases and that funding can be initiated before the title is received.
5. 5Stock it, recon it, retail it. The lender typically holds the title until the unit is paid off.
6. 6Pay it off when it sells, and the title is released to you for the buyer.

Plenty of private sellers still owe money on the car. The seller can't hand you a clean title until the loan is paid, and you don't want to hand over money without a clear path to that title. You have three ways through it:

• The seller pays off the loan first and gives you a clean title. The simplest, but often impossible if they owe close to (or more than) what you're paying.
• You pay the lienholder directly, using a written payoff letter, and pay the seller any remaining amount. Get the payoff figure in writing; it often differs from the balance on the seller's statement.
• Let your floor plan lender handle it. AFC says it can manage lienholder payoffs for dealers, including verifying the payoff, sending the funds and following up on the title.

Electronic titles add time. In many states, when a lien is released on an electronic title, the state prints a clean title and mails it to the owner, which can take weeks. Ask the seller whether their title is paper or electronic, and build that wait into your plan.

A floored private-party car costs the same to carry as a floored auction car. What you'll typically pay:

For a sense of scale, one industry guide works through a $12,000 unit at 12.25% with a 10% curtailment at day 60 and lands at about $351 of interest plus $170 of fees over 90 days, roughly $521 to carry it for three months. The lesson isn't the exact number; it's that carrying cost grows every day the car sits.

If carrying cost is the same either way, the difference is all in the buy. At auction you're bidding against franchise stores that can pay more because they make their money on financing, service and the next trade. You pay what the lane says, then buy fees and transport on top. From a private owner, you're negotiating with one person, and a good car can be bought under wholesale.

Floor the private-party car and you keep your cash free for the next one, while the spread you bought into covers the carrying cost several times over.

• Non-auction purchases are enabled on your floor plan, and you know the advance on this car.
• Title is in the seller's name and matches their ID.
• VIN on the title matches the VIN on the car (dash and door jamb).
• No title brand: salvage, rebuilt, flood or lemon.
• Lien status confirmed with the lienholder, and a written payoff letter if there is one.
• Paper or electronic title, and how long a lien release will take in your state.
• Signed title, bill of sale and odometer disclosure, as your state requires.
• Your state's dealer rules for buying from a private party (title work, reporting, timelines).
• The car inspected, and its value checked against wholesale and comparable listings before you agree a price.

• Agreeing a price before knowing the advance, then funding the difference out of pocket.
• Paying the seller before there's a plan for the lien.
• Assuming a title will show up in days when it's electronic and will take weeks.
• Letting the car sit. Every curtailment is cash out of your account, and every day adds interest.
• Buying a "private" car from a curbstoner. Dealers posing as private sellers price like retail, and their paperwork is where title problems come from.

Flooring private-party cars only works if you can find enough good ones, fast, at a price that leaves room under your advance. Hooptie watches every private-party marketplace in your radius every minute, filters out dealers posing as owners, pulls the VIN (even from the license plate), flags the title and condition, and values every car against wholesale and retail. You see the clean, under-wholesale cars first, with the number already on them, so you know before you call whether your floor plan covers the buy.