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Old 04-08-2013, 11:09 AM   #11
DealerEx
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Join Date: May 2009
Posts: 548
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Quote:
Originally Posted by XDCX View Post
I guess this is probably an example of why GMAC was demanding personal guarantees when they were issuing floorlines in 2009. In the old days a dealer use to be able to keep his/her assets separate so they wouldn't get wiped out if their business failed.

I wonder if there are any floorplan lenders that are issuing new lines that don't require personal guarantees?
In the past, the manufacturers accepted that the vehicles themselves were all the collateral needed on the floorplan because that was the only thing the dealer OWED them for. All the parts, merchandising materials, special tools etc...were paid for up front on the monthly statement, so they could never be at risk for more than one month's bill. If they closed a dealer down and took the inventory back they just picked up the phone and sold it to another dealer...and that worked when everyone always wanted more inventory, until the early 2000's when they started to realize that due to the huge incentives and dealer cash programs keyed to certain models that it might not be so easy to unload some of the cars in a crunch. Chrysler started trying to make the dealers sign a new Master Loan Agreement in 2001 that gave them "an unconditional and absolute personal guarantee for any and all obligations now existing or which may be incurred in the future. This guaranty is of unlimited nature with no limit on the amount which you are guaranteeing, unless laws of the state in which you reside do not recognize unlimited continuing guaranties in which case it shall be limited to a maximum of $10,000,000.00." Of course they didn't mention that little change and simply advised the dealers to sign it on the spot because "the changes were just some minor legalese details that needed to be cleaned up"...and almost all of them DID sign it without ever reading through it. I suspect now all lenders require it.
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