Car Dealers

Car dealers are middlemen that sell vehicles for automakers. They can also provide financing, maintenance and warranty services. They often employ many people and can be large employers in the community. Some are family businesses while others are part of larger dealer groups. They may be franchised to sell a particular brand of vehicle or represent multiple brands. The largest dealership groups can have annual revenues of $100 billion or more, which is more than the carmakers they represent.

Most dealers are in business to make money. Most of this comes from the sale of new and used cars, but they also earn profit from different products and services like service contracts, insurance packages and tire and wheel protection. Salespeople are paid commission, but bonuses for hitting quotas or achieving unusually high margins on a sale are common.

A dealer might hire a manager who appraises each vehicle offered for trade and attends used car auctions on the side. He or she has a realistic idea of the actual cash value of a used car and can offer a good deal for it. The dealer then builds in a profit when the window sticker price is negotiated down to a final sale price.

Dealers may also provide maintenance and repair services for the cars they sell, and this is a major profit center. They might sell a warranty or service contract, which they purchase from a third party at wholesale cost and then administer on behalf of the consumer. They might use a reserve fund to pay for deductibles or other repair costs and deduct that expense from the customer’s monthly payment. car dealers

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