Automobile Dealerships
A car dealership is a retailer that sells new and/or used cars. Used car dealerships carry many different brands of cars, while new car dealerships are generally franchises associated with only one or two manufacturers. However, in some areas, dealerships have been consolidated and a single owner may control a chain of dealerships representing several different manufacturers. New car dealerships also sell used cars, as they take in trade-ins and/or purchase used vehicles at auction. Most dealerships also provide a series of additional services for car buyers and owners, which are sometimes more profitable than the core business of selling cars.
Most car dealerships display their inventory in a showroom and on a car lot. Under federal law, all new cars must carry a sticker showing the offering price and summarizing the vehicle's features. Typically, salespersons working on commission only, negotiate with buyers to determine a final sales price. In many cases, this includes negotiating the price of a trade-in—the dealer's purchase of the buyer's current automobile.
Profit margins on new automobile sales are surprisingly low. A new car dealer may mark up a car by less than two percent over the manufacturer's invoice cost, and typically the car dealer borrows from the manufacturer for inventory and pays interest. On the other hand, manufacturers pay "hold-back" payments as incentives to dealers who reach sales targets, thus improving the fiscal stability of dealers.
Most aspects of operating a car dealership are regulated at the state level. Car titles are issued and transferred by the individual states through their respective Department of Motor Vehicles (DMV). The purchase price of a vehicle usually includes various fees which the dealer forwards to the state DMV in order to transfer the vehicle's title to the buyer. In many states, the DMVs also license and regulate car dealerships. Car dealerships, in many states, are capable of issuing all of the necessary forms for the DMV, allowing the customer to skip a trip to the local DMV office.