How Do Car Dealers Make Money?
A car dealership, or local auto sales, is simply a company that sells used or new vehicles at the local retail level, depending on a dealer contract with an auto maker or its distribution branch. It may also carry a selection of Certified Pre Owned vehicles as well. It employs car sales personnel to sell the automobiles. The automobile is typically a late model, factory fresh, one of several newly installed, and usually front end loaded model, such as a Honda prelude. The car is then offered for sale by the dealer under its own warranty, sometimes extended by the dealer.
There are several factors that influence the car dealership's profit margin in the selling of a car: It may need to hedge its bet by purchasing low quality models of cars to get a big discount from the manufacturer, it may need to minimize its risk by only offering certified pre-owned vehicles, or it may need to buy a large quantity of a model that quickly goes out of production to make room for the next batch. In any case, the car dealership will not be selling anything at all if it cannot generate a profit. It therefore needs to know where to find buyers for its inventory. One way is by having a trusted and successful finance company work as the agent for the car dealership.
An auto dealer needs at least one type of surety bond to protect it against losses in case it buys a car, but many dealers have more than one type of surety bond. For example, a car dealership may need a surety bond for a loan that it takes to buy its inventory. This loan could be a second mortgage, a home equity line of credit, or a vehicle-secured credit card. It is common for car dealers to list vehicles they are selling as sellers-at-least-for-cash or at "goods-in-transit" on their websites. Be sure to read carefully these listings to be sure you are getting a vehicle that is really for sale by the owner.
It is often wise for car dealerships to have a title service station to inspect and identify problems on newly-outfitted vehicles before taking delivery. You should ask the dealer about its current policy regarding title warranties. Some dealers will replace the title, if any problems occur within 60 days. Others will replace the vehicle for free but require a down payment to cover repair costs.
Many car buyers do not want to buy used cars, but many new car dealerships also sell used cars to individuals. Used cars are usually purchased from dealerships with existing lines of credit, which allow them to finance the cars with a low interest rate. However, there may be financing terms for used cars that are very different from those for new cars.
As you can see, the sales manager at your local car dealership may be a key player in your buying decision. How do car dealerships make money? By selling high-ticket items, such as used cars and motorcycles. By knowing what these deals are and how the dealer makes his profits, you can decide whether to use him when purchasing a vehicle. Take a look at this link: https://www.encyclopedia.com/economics/news-and-education-magazines/auto-sales-worker for more information about this topic.
