Vehicle Floorplan Facility

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Vehicle Floorplan Facility

10. Vehicle Floorplan Facility

In March 2020, the Company entered into a new vehicle floorplan facility with Ally Bank and Ally Financial (as amended to date, the “2020 Vehicle Floorplan Facility”). The 2020 Vehicle Floorplan provides a committed credit line of up to $700.0 million which is scheduled to mature on March 31, 2023. The amount of credit available is determined on a monthly basis based on a calculation that considers average outstanding borrowings and vehicle units paid off by the Company within the immediately preceding three-month period. As of September 30, 2022, the borrowing capacity of the 2020 Vehicle Floorplan Facility was $350.6 million, of which $5.3 million was unutilized. The 2022 Vehicle Floorplan Facility, as described below, will allow for more flexibility in the Company's borrowing capacity.

Outstanding borrowings related to the 2020 Vehicle Floorplan Facility are due as the vehicles financed are sold, or in any event, on the maturity date. The 2020 Vehicle Floorplan Facility bears interest at a rate equal the Prime Rate, announced per annum by Ally Bank, plus 105 basis points. The 2020 Vehicle Floorplan Facility is collateralized by the Company’s vehicle inventory and certain other assets and the Company is subject to covenants that require it to maintain a certain level of equity in the vehicles that are financed, to maintain at least 7.5% of the credit line in cash and cash equivalents, and to maintain 10% of the daily floorplan principal balance outstanding on deposit with Ally Bank. The Company is required to pay an availability fee each quarter on the average unused capacity from the prior quarter if it was greater than 50% of the calculated floorplan allowance, as defined. Cash deposits required under the Company's 2020 Vehicle Floorplan of $34.5 million and $50.6 million are classified as "Restricted cash" within the consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022 and December 31, 2021, outstanding borrowings on the 2020 Vehicle Floorplan Facility were $345.3 million and $512.8 million, respectively.

Interest expense incurred by the Company for the 2020 Vehicle Floorplan Facility was $6.5 million and $5.0 million for the three months ended September 30, 2022 and 2021, respectively, and $19.8 million and $12.4 million for the nine months ended September 30, 2022 and 2021, respectively, which are recorded within “Interest expense” in the consolidated statements of operations. The weighted average interest rate on the vehicle floorplan borrowings was 6.55% and 4.30% as of September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022 and December 31, 2021, the Company was in compliance with all covenants related to the 2020 Vehicle Floorplan Facility.

In connection with the 2020 Vehicle Floorplan Facility, the Company entered into credit balance agreements with Ally Bank and Ally Financial that permit the Company to deposit cash with the bank for the purpose of reducing the amount of interest payable for borrowings. Interest credits earned by the Company were $3.9 million and $2.9 million for the three months ended September 30, 2022 and 2021, respectively, and $11.4 and $7.1 million for the nine months ended September 30, 2022 and 2021, respectively, which are recorded within “Interest income” in the consolidated statements of operations.

In November 2022, the Company amended and restated the 2020 Vehicle Floorplan Facility to, among other things, decrease the line of credit from $700.0 million to $500.0 million and extend the maturity date to March 31, 2024 (as amended, the “2022 Vehicle Floorplan Facility”).

In addition, the amendment modifies the amount of credit available to the Company on a monthly basis to the product of (1) the greater of five times the aggregate number of retail units sold during the most recent month for which information is available or the aggregate number of retail units sold during the five most recent months for which information is available and (2) the greater of the average outstanding floorplan balance of all vehicles on the floorplan as of the immediately preceding month-end or the average monthly outstanding floorplan balance of all vehicles on the floorplan as of month-end for the immediately preceding five months. The amendment also provides that the Company may elect to increase its monthly credit line availability by an additional $25.0 million during any four months in the period from November 1, 2022 through March 31, 2024, subject to the maximum $500.0 million credit limit. Consistent with the terms of the 2020 Vehicle Floorplan Facility, the Company and Vroom Automotive, LLC have provided Ally with a guaranty of payment of all amounts owed under the 2022 Vehicle Floorplan Facility as well as a security interest in all or substantially all tangible, intangible, and other personal property of Vroom, Inc., to secure obligations under the 2022 Vehicle Floorplan Facility.

The 2022 Vehicle Floorplan Facility bears interest at a rate equal to the Prime Rate, announced per annum by Ally Bank, plus 175 basis points. Additionally, the Company is subject to amended covenants and events of default. The Company is required to maintain a certain level of equity in the vehicles that are financed, to maintain at least 20.0% of the credit line in cash and cash equivalents, and to maintain a minimum required balance with Ally of at least 12.5% of the daily floorplan principal balance outstanding through December 31, 2022 and 15.0% effective January 1, 2023. The Company was required to pay a commitment fee upon execution of the 2022 Vehicle Floorplan Facility.