Car dealers have a bad reputation as shady hustlers who exist to fast-talk suckers out of their money. But, the truth is that dealers operate legitimate businesses and earn their profits by selling cars at fair prices and establishing long-term relationships with customers.
Dealerships are important to the automotive industry because they provide a distribution and service network for manufacturers. They simplify the complex process of buying and selling vehicles; offer a variety of financing options to make car ownership more affordable; provide jobs in local communities; and ensure that warranty and safety issues are addressed quickly and efficiently.
Despite the fact that dealerships have many financial benefits, they also face several challenges. As a result, there are a number of tactics used by dealerships to increase profit and market share. These tactics include pricing cars above their actual cost, offering add-on products and services that aren’t needed or beneficial to consumers, and failing to disclose all fees and charges up front.
The profit margins of car dealers can vary, but they are generally around 2 to 3% on the MSRP of each vehicle. These profits are needed to cover the cost of showrooms, lots, staff, and inventory holding.
Some states, such as West Virginia, have recently passed laws that prohibit manufacturers from side-stepping dealers by directly selling cars to consumers. However, these legislative riders are often tucked into larger bills that focus on other topics and may not be newsworthy enough to garner much attention. car dealers