Car dealer business loans: used stock, yard upgrades and the gap between buying and selling

A car yard makes its money on the spread between what a vehicle costs to buy and recondition and what it sells for, and on how many times that cycle repeats in a year. Lenders reading a dealership want to know how fast the stock moves, how much cash sits in cars nobody wants, and who already has a claim over the vehicles on the lot.

What do car dealers typically borrow for?

• More stock. Buying extra units at auction or from trade-ins when good cars come up, rather than waiting for the next sale to free up cash.
• Reconditioning. Detailing, paint, tyres, roadworthy repairs and mechanical work before a car is ready for the front row.
• Sitting alongside a floorplan. Covering deposits, curtailment payments or the stock a floorplan provider won’t fund.
• Yard and showroom work. Sealing, lighting, signage, a covered display area or a workshop bay.
• Buying a dealership or a partner’s share. Goodwill, stock and fixtures in one go.

How does a lender read a dealership?

Stock turn. This is the number dealers and lenders both obsess over. A yard that turns its stock quickly can run a lean balance sheet; one with cars sitting for four or five months is effectively lending money to its own inventory.

Aged units. A lender may ask for a stock list with purchase dates. Units older than 90 days are a warning sign, especially if the business keeps buying more.

Gross profit per unit and volume. Steady margins across a reasonable number of sales a month show the buying and pricing discipline lenders want to see. The ATO’s motor vehicle retail benchmarks give typical cost ratios for the industry, and a dealer far outside them can expect questions.

Existing security. Floorplan providers usually register their interest over stock on the Personal Property Securities Register. A new lender will search it and needs to understand where it sits in the queue.

Licensing. Every state requires a motor dealer or trader licence to sell cars as a business. In Victoria, for example, it’s handled through Consumer Affairs Victoria’s motor car trader scheme. A lapsed licence stops an application cold.

If a strong buying window is opening up and cash is the only thing holding you back, check what your dealership could access — enquiring won’t touch your credit file.

Floorplan, stock loan or general business loan?

Option	What it funds	How it’s secured	Best for
Floorplan (wholesale stock finance)	Specific vehicles on the lot	The cars themselves, registered on the PPSR	Ongoing stock holding
Inventory finance	A pool of stock	Stock plus business strength	Dealers without a floorplan
Unsecured business loan	Recon, deposits, working capital	Turnover and bank statements	Short, flexible needs
Property-secured loan	Larger stock push, buyouts, yard works	Residential or commercial property	Bigger amounts and growth

Most established dealers use a mix. The floorplan carries the day-to-day stock, and a separate facility handles everything the floorplan won’t.

The aged-stock problem

Every dealer knows the car that should have sold in three weeks and is still there in month four. On its own it’s an annoyance. When a handful pile up, they quietly drain the business: the floorplan may require curtailment payments, the car keeps depreciating, and the space on the lot isn’t earning.

Lenders look for dealers who deal with aged stock decisively — wholesaling it out, repricing early, or sending it to auction — rather than borrowing more to keep buying around it. If you’re applying, it helps to show a current stock list and explain what’s happening with anything older than 90 days.

What documents help a dealer’s application?

• Six to twelve months of business bank statements
• A current stock list with purchase dates and costs
• Floorplan statements and the terms of any existing stock finance
• Motor dealer licence and insurance
• Latest BAS, financial statements and tax returns

Red flags lenders watch for

• Stock growing faster than sales, especially with older units on the list.
• Floorplan curtailments being missed or paid late.
• Thin margins per unit that rely on finance and warranty add-ons to make a profit.
• Mixing personal vehicles with yard stock.
• ATO arrears from a big year, which is considered case by case rather than an automatic no.

Questions you’ll likely be asked

• How many units do you sell in a typical month, and how many do you hold?
• What share of your stock is older than 90 days?
• Who provides your floorplan, and what are the limits?
• Where do you buy — auctions, trade-ins, private?
• What will the new funds change in the business?

Illustrative example

Illustrative example: a used car yard holding around 40 units wants to add a reconditioning bay and carry ten extra cars ahead of the tax-time selling season. It needs $150k. Its floorplan already covers core stock, so the owners use equity in a commercial property as security for a separate loan. The floorplan provider’s position is untouched, and the new funds cover the recon bay and the extra stock deposits.

A smaller yard needing $40k for recon and detailing could instead look at an unsecured facility sized on its banked sales. If your workshop does its own servicing, the mechanic workshop guide covers how lenders view that side of the business.

What does finance for a dealership cost?

There’s no standard price. Each facility is priced on the dealership’s own position: how long it has traded, how cleanly stock turns, the security offered, the term and how the money will be used. Alongside interest, expect an establishment fee on most loans, possibly valuation or legal costs where property is involved, and early repayment terms worth reading closely if you plan to clear the loan after a strong season. A dealer who can show a tidy stock list and consistent monthly sales gives a lender fewer unknowns, and fewer unknowns usually means a sharper offer. It’s also worth asking whether a facility can be redrawn, because stock needs rise and fall through the year and paying for unused money is a cost of its own.

When is the right time for a dealer to arrange finance?

Ahead of your strongest selling periods. Many yards see a lift around end of financial year as business buyers look at their tax position, and around the new year. Arranging funds a month or two before gives you time to buy well rather than buy in a hurry.

Ready to see what your yard could access?

If your dealership is moving cars and you can see where extra capital would earn its keep, a 60-second enquiry is the place to start. Asking doesn’t involve a credit check, and your details won’t be shopped around to a list of lenders. Someone who understands how yards work will look at your numbers and call you. Please complete it accurately — monthly sales, the amount you need and any property you own — so the first option we put in front of you is the right one.

See what my dealership could access →