In Bob Smith Automotive Group, Inc. v. Ally Financial, Inc.  2016 WL 3613402 (Md. 2016), the Maryland Court of Appeals was asked to decide a rather unremarkable legal question of whether certain documents were part of a contract.  But, in doing so, the Court of Appeals gave a succinct explanation of what Floorpan Lending:

The Automotive Sales Industry 101.  4…. [I]t is important to grasp the business model of a car dealership and its relationship with the auto manufacturer…. In layman’s terms, a car dealer, in business to sell cars and trucks to the consumer, acquires the right directly from a car manufacturer such as GM to sell its vehicles, thus becoming a franchised dealer for that particular manufacturer. The manufacturer has certain capitalization requirements that must be maintained by the dealer to assure that the franchise is solvent and operational.  The dealer is obligated to purchase cars and trucks from that manufacturer, a costly venture, requiring the dealer to front millions of dollars before the vehicles are sold to the consumer. The inventory of vehicles purchased and then offered for sale by the dealer is known in the industry as a “floor plan.” How many vehicles the dealer can purchase from the manufacturer in any given year and of what “make” is tightly controlled by the manufacturer, influenced by many factors such as location of the dealer, financial stability of the dealer, its past performance and competition in the area.  To have the money on hand needed to operate such a business requires substantial cash flow or liquidity. Discovering yet another means of making money, automobile manufacturers created affiliated financing companies “captive lenders”—through which a dealer could secure the needed funds, typically a line of credit at a rate of interest set by the financing entity, to purchase vehicles from the manufacturer and stock its floor plan. In the industry, this is called “floor plan lending.” The goal of the dealership is to sell the vehicle—for more than the manufacturer’s price, of course—as quickly as possible … to support its operating expenses, to reduce its debt load—the line of credit and finance charges owed to the lender—and to maximize profit. Notwithstanding other sources of income for a dealer such as sale of auto parts, operation of service departments and receiving commissions on the sale of automobile warranties, this relationship between the dealer and the lender is essential to the survival of a dealership. For the automobile manufacturer, having an affiliated captive lender insures that its franchised dealers have the means to buy the vehicles before any third party sale ever takes place.