The automobile industry is worth around $82.6 billion in the United States of America. A big chunk of this industry comprises the business drawn in through a car dealership. We can also refer to it as a local vehicular distribution company. They deal in new and used cars.
However, most dealerships provide maintenance and other such services to their customers. A good dealership makes most of its profit from car maintenance and other workshop services—a bit lesser from used cars and the least from new vehicles.
The United States is the world’s leading country in importing cars. A total of $145,659,382,000 worth of vehicles got imported to America in 2020 alone. It ranks third in the list of automobile importing countries. So there is a big industry for cars here in the U.S.
According to a report in 2020, there are currently 292,825 factories producing cars in the U.S. These factories include the American brands of vehicles, for instance, Ford, Jeep, Lincoln, Cadillac, Ram, Chrysler, GMC, etc.
Around 14,947,180 cars are sold in America every year. These numbers are only second to China’s annual sales of 21,482,374 vehicles.
How the car dealership business spread across the U.S
Cars have been around since 1886. They were first manufactured and sold to the general public by the founder of Mercedes Benz, Karl Benz. In the early days, automobile companies sold cars in departmental stores. Mail orders and traveling representatives even sold them.
There was a total change of pace when the co-founder of Cadillac, William E. Metzger, introduced the first-ever car dealership in America in 1898. This concept caused a revolution in the cars business. Soon enough, the automobile business began thriving through car dealerships.
This commotion led to the dealerships becoming franchises of specific companies. They were responsible for selling their cars and providing mechanical services. These car dealerships also deal with spare parts, which bring in extra business.
Nowadays, it is strictly regulated and prohibited to sell directly to customers by an automobile company in the majority of the states. Consequently, franchise laws have bound the manufacturers to sell new cars through a bonded and licensed, independently owned used car dealership in Manassas VA.
The car dealership debacle
Although there is no doubt that car dealership has made it easier for a customer to buy and sell their automobiles, automobile experts and sales associates can guide you best to make the right choice as per your needs. It is also a relief to get your car serviced by qualified automotive technicians.
But certain aspects to it will make you ponder if a car dealership is the best option for you or not.
First off, according to statistics, a car dealership unnecessarily increases the price of the car. Even so, it can be justifiable for the services they are providing. One thing that seems illegal but surprisingly is not is issuing a new dealership license.
Family-run or finders, keepers?
A car dealership license is restrict geographically. It means that no other car dealership is allowed to launch there if a dealership is in specific vicinity. Thus, there will be no competition for the dealership. It has created a form of hereditary business even though these dealerships are under constant scrutiny by franchise laws under the dealership sales model. The company gets passed from one generation to another—this geographically restricted licensing, although, creates a better customer experience in its capacity. Due to the business’s presence for a long time, the residents share a family-like bond with the dealership. Though on the downside, this has made the dealerships less caring towards customer benefits and proving qualifications. These dealerships will continue booming till they prove to the state that they meet the minimum legal standards.
Despite this, Tesla has rejected this business model. They claim that the local dealerships do not explain the features of their cars adequately. It has affected their overall sales. Keeping in mind, Tesla is a fully electric car company. They want to make sure that the world knows about an electric car’s advantage over a fuel combustion engine. So now, Tesla sells their vehicles online. It is only possible because they have set up city center galleries. Potential customers can visit and view their car and understand the features here correctly.
Despite this drawback in this industry, there are around 139,723 new and used car dealerships around the U.S.
Why a car dealership is a necessity
Around 15% of the cars are bought directly from the manufacturer. Nevertheless, it is only possible if a dealer mitigates the deal. Moreover, most people usually prefer a used car to newer ones. Therefore, it is essential to know how a car dealership works and how they have prevailed for so long.
Ease of availability
It is vital to understand that what matters most to a customer is the overall customer experience. Most car dealerships make their money by servicing cars. They sell used or new vehicles to a new customer and create a loyal customer. In due course, that customer will seek their help in case of any maintenance issue or merely car service. These businesses also deal in spare parts. So once a customer buys a car from them, he will refer to them in the future for any other needs that might arise. Dealerships also allow for an easier way for customers to claim their car’s warranty and recall work.
Lemon law protection
Lemon laws are unites states state laws that protect the buyer of new cars from potential monetary loss. This law applies to purchasing cars and other consumer goods; however, it majorly applies to vehicles. If a vehicle is substandard and fails to meet quality standards, the manufacturers are bound to repurchase it from the initial buyer. Lemon law considers several things before being applicable on the condition:
- The type of problem with the vehicle
- The number of repair attempts made on the vehicle
- The amount of time the vehicle was unavailable to the consumer due to this problem.
- Whether the company completed the repair within the time stated in the state statute.
All these pointers sum up to see if the case is legitimate for the application of lemon law.
Nevertheless, the dealership is not under obligation to this law as they never guarantee the quality of the car. They are merely the brokers. Therefore, the automakers are held responsible for the deliverance of a poor-grade car.
Greater buying power
A car dealership is notorious for its helpful and easy selling process. It is a crucial point to play on for an automobiles broker. They need to develop a relationship of trust and respect with their customers.
Empowering customers with easy and in-reach financial options is another way to develop brand loyalty. Another reason why a dealership is a viable option for millions of consumers is ease of mind when buying a high-end vehicle.
The average per day sales of car dealerships around America has exceeded $90 million. This influx in sales is due to the high purchasing power of the consumers.
It is common speculation that a day will come when this business will become obsolete. But apparently, that day is yet to come. So, let’s see if we live long enough to see the downfall of this prosperous yet.