Automobile Dealers

Automobile dealers are the link between the manufacturer of the automobile and the U.S. consumer. With their large inventories of cars, dealers provide consumers with a wide array of vehicles to meet their needs at different price points.

Goods and services. The automobile dealer industry sells most of the automobiles, light trucks, and vans that operate on the road today. Sales of these vehicles are subject to changing consumer tastes, the popularity of the manufacturer’s vehicle models, and the intensity of competition with other dealers. Along with the sale of the car, most dealers also sell additional automobile-related services to potential buyers. These services include extended warranties, undercoating, insurance, and financing. Aftermarket sales departments sell these services and other merchandise after vehicle salespersons have closed a deal. Sales of these packages greatly increase the revenue generated for each vehicle sold. Because sales of automobiles fluctuate significantly, automotive dealers offer generous incentives, rebates, and financing deals during slow periods to maintain high sales volumes and to reduce inventories.

Leasing a car or truck is an alternative to purchasing a vehicle and an additional service provided primarily by new car dealers. Leasing services have grown in recent years to accommodate changing consumer purchasing habits. As vehicles have become more costly, growing numbers of consumers are unable or reluctant to make a long-term investment in a new car or truck purchase. Leasing provides an escape from high initial investment costs and typically yields lower monthly payments than purchasing options.

Performing repair work on vehicles is another profitable service provided by dealers. Service departments at motor vehicle dealers provide repair services and sell accessories and replacement parts. While most service departments perform repairs only, some dealers also have body shops to do collision repair, refinishing, and painting. The work of the service department has a major influence on customers’ satisfaction and willingness to purchase future vehicles from the dealer.