How a Car Dealership Works

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A car dealership is a form of business between a car seller and manufacturer of a specific brand car, wherein the car dealer orders cars from the manufacturer based on the market analysis and trend on which car model will sell and based on the demand of the public. The car manufacturer and car dealer works out a credit line which the dealer uses to purchase the car models and the dealer pays them according to the credit agreement.

Because the car manufacturer extends the credit to the car dealer, it has a dominant role in the business in the sense that it will impose some unpopular car models to the car dealer to sell, since part of the dealership condition is for the car dealer to display an almost complete line of the car models from the car manufacturer. The unsold car model is discounted at the end of the model year and either resold back to the manufacturer or through a third party auction. The point of business consideration for the car dealer is to have enough of the car models that will sell in his car lot and just having a few of those models that are expected to sell poorly. Watch https://www.youtube.com/watch?v=szPE_YCjc6g to learn more about car dealers.

In the real business condition of car dealership, car dealers do not profit much from selling new car models, instead, they make money from their car service departments, where car parts that come straight from the manufacturer can only be purchased through the dealership company. This means that the customer and private repair shops will have to purchase the car parts at the dealership company. Even if there is a manufacturer’s suggested retail price of each car part, the car dealer is free to mark up the price. With respect to the car mechanics in the dealer’s car service department, they are initially trained by the dealer here before they do car repairs and these mechanics are in-house employees of the car dealer. For cars that are on leased by the car dealer, any repairs are done at the dealership company.

Also, car dealers make a huge profit from selling used cars than the new models, but whether the cars are new or old, any repair job will be channeled to the car dealer’s service department. So, it goes to say that the kind of business a car dealership comes out to be is simply like a repair shop that sells cars. Click here to get started.

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