Stocking Finance for Car Dealers — How It Works and Why It Matters

Running a car dealership requires capital. Lots of it. A forecourt of 20 used cars could represent £300,000 to £600,000 or more tied up in stock. For most dealers, holding that much cash in metal simply isn't viable. That's where **stocking finance** — also called **floorplan finance** — comes in. 🚗 --- ## What Is Stocking Finance? Stocking finance is a **revolving credit facility** that allows a car dealer to fund their forecourt inventory. Instead of buying vehicles outright, the lender pays the stock cost. The dealer holds the vehicle and repays the lender when the car is sold — typically within 30 to 90 days. Interest is charged on the outstanding balance for the period held. When a car sells, the line clears and becomes available again — like a revolving overdraft. --- ## How Does It Work in Practice? 1. **Dealer identifies stock** — at auction, private seller, or trade source 2. **Finance facility funds the purchase** — lender pays the vendor directly 3. **Vehicle goes on forecourt** — dealer prepares it for sale 4. **Car sells** — dealer repays the stocking lender from sale proceeds, keeping the margin 5. **Line is available again** — the facility revolves for the next purchase Most facilities have a maximum credit line agreed upfront, dictating the total value of stock that can be funded at any time. --- ## Benefits for Dealers Stocking finance allows dealers to: - **Hold more stock** than their cash position would otherwise allow - **Preserve working capital** for wages, overheads, and marketing - **React quickly** to auction opportunities without waiting for cash - **Scale their business** without proportional capital investment - **Improve stock turn** by accessing the right vehicles at the right time For independent dealers especially, a well-structured stocking facility can be the difference between a business that grows and one that stagnates. --- ## What Do Lenders Look For? Lenders typically assess: - **Dealer track record** — trading history and financial performance - **Credit profile** — business and sometimes the principal director - **Stock profile** — types of vehicles being funded (age, value, make) - **Proposed facility size** — does it match trading volume? - **Business turnover** — evidence of sustainable trading New dealers may find mainstream stocking lenders harder to access. A **specialist broker** can identify providers with more flexible criteria. --- ## What Does It Cost? Typical structures include: - **Daily or monthly interest** on outstanding balances — often 6–15%+ APR - **Free stocking periods** — some lenders offer 30–60 days interest-free - **Facility fees** — some providers charge annual or monthly admin charges The key metric is the **cost of carry** — total interest paid versus margin generated. A well-run facility should be significantly covered by the margin on each sale. --- ## How WFYA Can Help We Finance Your Asset works with independent car dealers looking to structure or refinance their stocking facilities. We have relationships with **specialist motor trade lenders** and can help you access funding that fits your business — whether you're starting out, scaling up, or looking for a better rate. Based in **Reading, Berkshire**, we work with dealers across the South of England and nationwide. 👉 Get in touch at **wefinanceyourasset.co.uk** — happy to discuss your stocking finance requirements.