What Is Floor Plan Interest

Account 076 interest floorplan is es tablished to record the interest charges on vehicles in inventory financed under the dealership s floorplan line of credit.

What is floor plan interest.

A business can deduct its business interest only to the extent of the sum of its business interest income 30 of its adjusted taxable income and its floor plan financing income. Example 1 record the accrual of floorplan interest for the current month in the amount of 9 183. Floor planning is a form of retailer financing for large ticket items displayed on showroom floors or lots. Business interest in excess of the limitation can be carried forward indefinitely.

What you don t realize is that like most new car dealers a floor plan was used to finance the cars. Specialty lenders traditional banks and finance arms of manufacturers provide the. With a floor plan the initial investment needed to buy a particular unit is a fraction of the vehicle s actual purchase price. An interest rate floor is an agreed upon rate in the lower range of rates associated with a floating rate loan product.

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.