What Is a Car Dealership?

A car dealership is a business that specializes in the sale of new and used vehicles. It also offers vehicle financing, provides car insurance options and helps customers with maintenance and repairs. Dealerships are usually grouped together and serve a specific geographic area. This way, the company can provide more consistent service and build its brand. Successful dealers focus on three key aspects of their businesses: locating in the right place, having a well-trained staff and having a strong finance department.

Most people who buy vehicles visit a car dealership to find and test drive the cars they want to purchase. Depending on the type of vehicle and its specifications, customers can often get a better deal buying from the dealership than through an independent seller. Dealerships can save time and money by providing customers with a wide variety of vehicle choices and by handling the entire purchase process from start to finish.

The main function of a car dealership is to sell automobiles, but it is also an important economic engine that creates jobs in its local community and contributes taxes. Having a well-run dealership can be very lucrative, but it requires a high level of commitment and vigilance to maintain a steady flow of business and avoid costly mistakes. To maximize its potential, a dealership should offer quality vehicles, competitive prices and excellent customer service.

In the United States, dealers are licensed by state law to sell new vehicles manufactured by various manufacturers. Those who specialize in a particular manufacturer typically receive a significant portion of their revenue from the manufacturer. Some dealers also make a profit on the sale of accessories and parts to consumers.

Many car buyers rely on dealership financing to complete the purchase process. Dealerships have the option to directly finance loans through their own financial departments or to arrange indirect financing with a bank or credit union. When a dealer offers direct financing, it will write a contract with you that is payable over a specified term and includes the price of the vehicle, sales tax, a finance charge and a document fee. The dealer will usually sell the contract to a finance company or bank that will service the loan and collect payments.

Some consumers prefer to take the risk of arranging their own financing outside of the dealership, and this can be a good strategy if you have an excellent credit score and can negotiate a favorable rate. However, most experts recommend securing a preapproved loan before you go to the dealership. This will help you compare financing offers from multiple sources on an apples-to-apples basis and more easily catch any additional charges or add-ons that may slip into the deal. This will also encourage the dealer to offer you their best financing terms and save you time at the bargaining table. In addition, it will give you leverage if you choose to decline the dealer’s financing offer. If you do decide to accept dealer financing, be sure to ask about the interest rate and other terms before signing any documents.