Understanding How Car Dealerships Function
Discover how car dealerships operate, from sales and marketing to pricing and stock management. Learn about their role in vehicle sales, customer assistance, and profit generation within the automotive industry.
Car dealerships operate similarly to retail outlets, focusing primarily on vehicle sales. In addition to selling new and used cars, dealerships often generate significant income through supplementary services like vehicle maintenance and repairs. The market includes various types of dealerships—some specialize in brand-new vehicles while others deal with pre-owned cars from multiple manufacturers.
In the country, more than a thousand car dealerships exist, with a few major automakers dominating a large share of total sales.
Dealerships tend to profit more when manufacturers hold a significant portion of market sales. Their role extends beyond buying and selling — advertising is crucial. Dealerships promote vehicles locally and often offer enticing discounts to attract buyers. Higher sales volumes directly enhance their earnings.
They employ skilled salespeople trained by automotive brands to assist customers by explaining vehicle features. These experts help customers compare options, facilitating an informed purchase decision.
Dealerships operate under agreements with manufacturers that set the maximum and minimum resale prices for vehicles. The final selling price is determined by the manufacturer, which explains the consistency in vehicle prices across different dealerships. Manufacturers also require dealers to maintain a minimum stock to ensure availability and sales continuity.
