Unit stocking finance is a form of credit used by car dealers to help them stock their businesses with vehicles. These deals are often made with car manufacturers and banks. They help car dealers to avoid having all their cash tied up in stock. Many large dealer networks now go to the open market for stocking finance in order to find the very best deal when the manufacturer’s interest-free period expires.

The dealer usually has 90 days to sell the vehicle or buy back the vehicle at the end of this period. Once the vehicle is sold, the funder will be notified and repaid and the title will be released. There is an element of good faith and trust which must be present in the funder/dealer relationship for the product to work. There is a very real risk of fraud, in particular:

  1. Overvalued assets
  2. Sale out of trust
  3. Risk of duel financing

A general rule of thumb is that you cannot sell something if you do not own it. However, there are various exceptions to this general rule, and in the case of unit stocking this is the mercantile agency. A funder is likely to lose the title to any vehicle sold out of trust if the purchaser can show that they:

  1. Purchased from a mercantile agent (someone trusted with vehicles to sell on behalf of the owner)
  2. The mercantile agent was in possession of those goods with the consent of the owner
  3. There was a sale of the vehicle
  4. The sale was in the ordinary course of business
  5. The sale was in good faith 

Unfinished business

If you have a vehicle-history check made on a car, this might reveal that the dealer hasn’t yet paid off the unit stocking finance. If that’s the case, make sure the dealer confirms with you that they’ll settle that completely before you take ownership. Oh, and get that in writing to make the whole process quicker. To give you peace of mind CarMoney will always run a vehicle-history check on any car which you decide to buy.

Frequently Asked Questions

What type of agreement is unit stocking?

Unit Stocking is a common finance agreement that motor dealers use to fund the vehicles that they have sitting on the forecourt. Therefore, this type of finance may show on your HPI report if you are buying your car from a dealer. The best action to take in this instance is to contact the dealer and discuss it with them.

What are the benefits of a unit stocking agreement?

In a stocking agreement, a buyer agrees to purchase, and a supplier agrees to ship a certain amount of product throughout a set time. This arrangement allows companies to manage their inventory to avoid overstocking or running out of a product.

What are the benefits of a unit stocking agreement?

The main benefit for a dealership is that they can fill their forecourt with quality stock. This arrangement also allows dealers to manage their inventory to avoid overstocking or running out of units to sell. 

Now, what can we do for you?

CarMoney offers fiercely competitive rates for car loans, as well as great HP and PCP deals. Want to offer finance to more of your customers? We have rates from 7.9% APR and an acceptance rate of 68%! Not only that, but our partner dealers benefit from having their own dedicated account manager and our brilliant offers every month. So that’s pretty much all the bases covered.

Posted 28/03/2017 Back to Blog

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