NextGear Capital to finance franchise dealership inventory

NextGear Capital, which is affiliated to auction specialists Manheim and previously specialised in the independent auto dealership market, is to start offering loans to finance franchise dealerships’ new- and used-vehicle inventory.

This is the first time that either Manheim or one of its affiliates has offered new-vehicle floorplan loans to franchise dealers, putting the company in direct competition with customers or potential customers of Manheim, such as the finance companies that sell their off-lease vehicles at Manheim auctions.

NextGear offers financing for independent used-car dealerships, and has previously only made a very small number of loans to franchise dealers to finance their used vehicles. The company piloted its new programme with a six month trial last summer offering loans to franchise dealers with small and rural retail operations.

The approach is now being rolled out more widely, with NextGear targeting franchise dealers who own up to about 10 small stores. The company does not provide loans for operating capital.

Eric Hurst, vice president of franchise and major dealer operations at NextGear, said: “NextGear is connected with a thousand auctions across the US with a touch of a button. A lot of the banks have not invested in the infrastructure to do that because they are not in the floorplan business; it’s a sidebar for them. We get up and we do it every single day. It’s like drinking water.”

Hurst said NextGear’s competitors are not automakers’ captive finance companies, adding that the floorplan landscape is large enough for his company to fit in nicely.

“We’re not going out to the bigger captives and saying, ‘Hey, we’re going to take over the world,’ because that’s not the plan,” Hurst said. “There is $1.5 trillion worth of new cars on the ground across the US. That’s more than any one company can begin to chew off.”