Net Terms vs. Floor Plan: What Dealer Open Accounts Really Cost

A manufacturer that ships dealers on 60, 90 or 180-day terms is acting as the dealer's lender. It just isn't pricing the loan, underwriting the borrower or auditing the collateral. That works while the network is small and the dealers pay on time. It stops working when the receivable gets big enough that finance starts asking questions sales can't answer.

Open-account terms are common for good reasons. They're simple, dealers like them, and they help a newer brand get stocked. But they put a growing, unsecured loan book on the manufacturer's balance sheet, and most manufacturers never decided to run one.

The receivable you didn't price

Every dollar a dealer owes you on open terms is a dollar of your capital sitting on their lot. That capital has a cost, whether or not anyone writes it down.

The math is simple. If dealers owe you $5 million on open terms, and your cost of capital is 8%, carrying that balance costs you about $400,000 a year before a single dealer pays late. Stretch the average days outstanding, add a dealer or two who slows down in the off-season, and the number moves the wrong way. The calculator on our net terms page runs the same arithmetic on your own figures.

Slow payment is common across manufacturing. Allianz Trade's July 2026 cash conversion report found global payment terms averaged 56.5 days in 2025, and named machinery equipment among the sectors with the longest cash conversion cycles (Allianz Trade). Dealer terms of 90 or 180 days sit well past that.

The cost isn't only interest. Your credit team ends up making dealer credit calls it was never staffed for. Your sales team ends up arguing for higher limits on dealers who already owe the most. And when a dealer gets into trouble, you're an unsecured creditor holding an invoice.

What changes when a lender takes the receivable

Floor plan moves that balance to a lender whose business is carrying it. When the dealer orders, the lender pays your invoice. You're paid when the lender funds the order, often the next day, instead of 60, 90 or 180 days out.

The lender decides how much credit each dealer gets. Your team stops making those calls. The lender also secures each line with the units themselves and tracks them by serial number or VIN. It audits them on the lot, too. That's the work your open-account program was quietly skipping.

One thing doesn't get better for the dealer, and it's worth saying plainly. Floor plan carries interest or fees set by the lender, so the cost of carrying inventory moves from you to the dealer. Usually that means dealers pay more than they did on your terms. Some manufacturers close that gap by sponsoring an interest-free period on new units, which keeps dealers whole while the manufacturer still gets paid at funding.

Moving dealers without losing them

The worst way to do this is a letter that says terms end on the first of the month. The better way is a program dealers can see before you change anything.

Start with a group, not the whole network. Pick the dealers who carry the biggest balances and the ones who order most often, because they gain the most from a line that grows with them. A program can start with a group of dealers and grow from there.

Give dealers a reason to move early. An interest-free period on new units, for example, makes the first orders on the line cheaper than the last orders on your terms. Then set a date for the remaining dealers, with enough notice that nobody gets caught mid-season.

Some dealers won't qualify for a line, and that's useful information. A dealer a lender won't underwrite is a dealer you've been underwriting yourself, on terms you set without a credit review. Better to learn that from a lender's decision than from a bankruptcy notice.

Tell your sales team before you tell dealers. Reps who hear about the change from a dealer will defend the old terms, and the dealer will believe them.

And keep the experience simple. Each dealer applies once for a line on your program page. After that the dealer requests funding and pays off units in one portal with your name on it.

What you still do

You'll usually sign a dealer program agreement with the lender, often with repurchase terms. That's your side of the deal: standing behind your product if a dealer can't sell it. After that, the day-to-day runs through Vero on VeroOS, from dealer onboarding to the last payoff. The lender underwrites and signs every dealer and funds the line on terms it sets.

Quick answers

Will dealers pay more than they do on our terms? Usually, yes. Some manufacturers sponsor an interest-free period on new units to keep dealers whole.

Do we have to move every dealer at once? No. A program can start with a group and grow.

Who decides how much credit each dealer gets? The lender.

If the receivable problem started because a bank capped your dealers' lines, the fix looks different. See what happens when a floor plan lender exits.

Vero runs dealer floor plan programs for lenders on VeroOS. See what you're carrying on open terms and how a program moves it to a lender.