What Is Floor Plan Financing Interest

Specialty lenders traditional banks and finance arms of manufacturers provide the.

What is floor plan financing interest.

Much like a credit card a floor plan financing company extends a line of credit to a car dealer. Simply it is a way for an auto dealer to use a lender s funds to finance the cars and until each of them is sold the lender holds title to the cars. But it came at a cost. Dealerships that take the floor plan financing interest exclusion in computing their limit can t claim 100 bonus depreciation for their fixed asset additions.

Floor plan lending is a form of inventory financing for a dealer of consumer or commercial goods in which each loan advance is made against a specific piece of collateral. Floor plan financing interest expense remained fully deductible under tax reform. Floor planning is a form of retailer financing for large ticket items displayed on showroom floors or lots. Floor plan financing interest expense is interest on debt used to finance the acquisition of motor vehicles held for sale or lease where the debt is secured by the acquired inventory.

Floor plan financing interest expense is not subject to the section 163 j limitation. The money borrowed from the bank collects interest and one has the choice to either make a minimum payment or pay off the balance in full when the bill is due.