Stellantis Financial Services has won a $5.4 million default judgment against Iowa dealership group Sky Auto Mall following allegations that the dealer used the same vehicles as collateral for financing from multiple lenders.
The case centers on what is commonly called “double flooring” or “double-pledging.” Stellantis alleged that Sky Auto Mall obtained financing on vehicles through more than one lender, with court filings alleging the dealership moved vehicles between its locations as part of an effort to conceal the duplicate financing.
The judgment was entered after Sky Auto Mall failed to respond to the lawsuit. According to court records, Stellantis was awarded $4.82 million in principal, plus roughly $750,000 in interest and fees, less an offset of about $70,000.
The dispute had already affected the dealership's operations. Stellantis moved to recover vehicles from the dealer earlier in the case, while Sky Auto Mall also laid off employees at its locations. Reports said the dealership's owners subsequently filed for bankruptcy.
Why it matters: Floorplan financing allows dealers to stock inventory without paying the full cost of every vehicle upfront, but the vehicles remain collateral for the lender. Using that same inventory to secure financing elsewhere can create a serious problem for both the dealer and the lenders involved.
The $5.4 million judgment is a particularly costly example, although it came by default rather than following a trial in which the allegations were contested.
