Automobile dealers are the bridge between automobile manufacturers and the U.S. consumer. New car dealers are primarily engaged in retailing new cars, sport utility vehicles, and passenger and cargo vans. New car dealers employ more than 9 out of 10 workers in the industry. Most new car dealers sell these new vehicles in combination with other activities, such as repair services, retailing used cars, and selling replacement parts and accessories. These dealer offer one-stop shopping for customers who wish to buy, finance, and service their next vehicle. On the other hand, stand-alone used car dealers specialize in used vehicle sales and account for only 1 out of 10 jobs in the industry.
Sales of new cars, trucks, and vans depend on changing consumer tastes, popularity of the manufacturers’ vehicle models, and the intensity of competition with other dealers. The business cycle greatly affects automobile sales-when the economy of the Nation is declining, car buyers may postpone purchases of new vehicles and, conversely, when the economy is growing and consumers feel more financially secure, vehicle sales increase. Consumers are also highly sensitive to the cost of borrowing. Automotive dealers are more likely to offer generous incentives, rebates, and financing deals during slow periods in order to maintain high sales volumes and lean inventories.
According to the National Automobile Dealers Association, new vehicle sales account for over half of total franchised new-car and -truck dealer sales. These sales spawn additional revenue in other departments of new car dealers. By putting new vehicles on the road, dealers can count on aftermarket additions, new repair and service customers, and future used vehicle trade-ins.
The aftermarket sales department in new car dealers sells additional services and merchandise after the new vehicle salesperson has closed a deal. Aftermarket sales workers sell service contracts and insurance to new and used car buyers and arrange financing for their purchase. Representatives offer extended warranties and additional services, such as undercoat sealant and environmental paint protection packages, to increase the revenue generated for each vehicle sold.
Car and truck leasing arrangements are another financing option for consumers. 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 the long-term investment entailed in the purchase of a new car or truck. Leasing provides an alternative to high initial investment costs while typically yielding lower monthly payments.
Service departments in automobile dealers provide automotive repair services and sell accessories and replacement parts. Most service only cars and small trucks, but a small number service large trucks, buses, and tractor-trailers. 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.
The used car sales department of new car dealers sells trade-ins and former rental and leased cars, trucks, and vans. Because new car prices continue to increase faster than used car prices, used cars have become more popular among customers. Also, innovative technology has increased the durability and longevity of new cars, resulting in higher quality used cars. In recent years, the sale of used cars has become a major source of profits for many new car dealers in the wake of decreasing margins for new cars. In fact, some luxury vehicle manufacturers promote “certified pre-owned” vehicles to customers who may be unable to afford new vehicles of a particular make. In economic downturns, the demand for these and other used cars often increases as sales of new cars decline.
Stand-alone used car dealers range from small, one-location stores to large, nationwide superstores, which have increased in popularity over the last decade. Like the used car departments of new car dealers, they also capitalize on increased demand for used cars and relatively large profits on sales of previously owned cars, trucks, and vans. Some of the larger stores offer low-hassle sales on large inventories of these popular vehicles. Such dealers typically contract out warranty and other service-related work to other dealers or to satellite service facilities. Growth in leasing agreements and rental companies will continue to provide quality vehicles to these dealers, thus providing for future employment growth in the used car market.
Automobile dealers increasingly use the Internet to market new and used cars. Through websites, consumers can easily access vehicle reviews, and compare models, features, and prices. Many web sites also allow consumers to research insurance, financing, leasing, and warranty options. This results in a more informed consumer and may decrease the amount of face time needed with salespersons.