Used Car Dealer Merchant Cash Advance & Business Funding
Independent used car dealers can get a merchant cash advance, and funders read them differently from most retailers. Deposits arrive in large, uneven amounts as deals fund, inventory is usually financed on a floor plan, and buy-here-pay-here lots collect weekly customer payments. Funders look at the floor plan, deal flow and how quickly cars sell.
How do funders read used car dealers?
Funders look at monthly units sold, days in inventory, floor plan balances and, for buy-here-pay-here lots, the collection rate on customer contracts. They'll want to know who has a lien on the inventory, since the floor plan company usually does.
How does money come in for used car dealers?
A retail sale deposits when the customer pays or when the auto finance company funds the contract, often days after the car leaves the lot. Buy-here-pay-here dealers collect weekly or biweekly payments from customers. Wholesale sales at auction and trade-ins add irregular deposits. Floor plan payoffs and curtailments go out as cars sell or age.
Which months are slowest for used car dealers?
This table shows how many people private used car dealers (NAICS 441120) businesses employed each month, as an index where the year's average is 100. It comes from the Bureau of Labor Statistics Quarterly Census of Employment and Wages, the most recent full year available. Staffing is a stand-in for how busy a business is. Deposits can move more or less than headcount, so read it as the shape of the year, not your numbers.
| Month | Staffing index (average = 100) | |
|---|---|---|
| January | 99 | lowest |
| February | 100 | |
| March | 100 | |
| April | 101 | |
| May | 101 | highest |
| June | 100 | |
| July | 100 | |
| August | 100 | |
| September | 100 | |
| October | 100 | |
| November | 100 | |
| December | 99 |
The low point is January at 98.8 and the high point is May at 100.9, a swing of 2.1 points. Staffing climbs slightly into late spring, when tax refunds bring buyers onto lots.
| Quarter | Total payroll index (average = 100) |
|---|---|
| Quarter 1 | 93 |
| Quarter 2 | 106 |
| Quarter 3 | 98 |
| Quarter 4 | 104 |
Payroll by quarter can rise at year end for reasons like bonuses and overtime, not only more work.
What do used car dealers use merchant cash advances for?
- Buying inventory at auction when the floor plan is full.
- Reconditioning, parts and detailing.
- Floor plan curtailments on aging units.
- A service bay or lift.
- Marketing ahead of tax refund season.
What does an advance payment look like in a slow month?
Staffing barely moves through the year here, so the slow month to plan for isn't seasonal. Say a slow month of deals funding leaves deposits 20% under average while floor plan payments continue. Say a business like yours deposits $250,000 in an average month and carries a fixed payment of $25,000 a month, 10% of that average:
| Deposits | Fixed payment | Share of deposits | |
|---|---|---|---|
| Average month | $250,000 | $25,000 | 10.0% |
| A month 20% below average | $200,000 | $25,000 | 12.5% |
A fifth less in deposits turns a 10% payment into 12.5%. Keep a cushion for it, or ask how reconciliation works before you need it.
Which funding options fit used car dealers?
Each page runs one option against this industry's slow months.
Same-day merchant cash advance for used car dealers
Money the same business day for an urgent cost, with the fixed daily debit measured against a slow month.
Business line of credit for used car dealers
A draw sized for a slow month, repaid in thirds, with the interest on the balance worked out.
MCA consolidation for used car dealers
One payment in place of two, with the share of deposits before and after in a slow month.
Second position MCA for used car dealers
What a second advance adds on top of the first, and what both payments take from deposits in a slow month.
Run a business like this?
Tell us your slow months up front and we'll look for funders that size for them. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.