Car dealerships have learned to adapt to the changing market and consumer expectations. They have diversified their revenue streams and gained strong service departments to maximize profits.
Many people believe that they are taken advantage of when buying a vehicle from a car dealership. However, most dealerships rely on the volume of sales to make money.
Sales
A car dealership is a business that sells new and used vehicles. It also sells car spare parts and automotive maintenance services. In the United States, most states require dealers to be independent from the vehicle manufacturer. This allows the dealer to provide a variety of competitive prices and services for customers.
The sales department is the heart of a car dealership. This is where customers are greeted by a salesperson who will ask questions about their lifestyle and driving habits to help them find the right car. They will also try to upsell additional products and services like extended warranties.
After the customer decides on a car, they will be handed off to the finance manager. This is usually a man, and they will negotiate with the customer over the price of the vehicle. This is when it’s important to know that you have the power to walk away if the process becomes too long or frustrating.
Financing
Running a successful dealership requires more than just having a lot full of cars and an excellent sales team. You also need a solid in-house financing department. Learn how to set up your own finance department, and you’ll have a much greater chance of success year after year.
Dealerships often offer in-house financing to consumers that may not qualify for a loan through their own financial institution due to credit issues or other reasons. They essentially shop for the consumer by reaching out to multiple lenders on their behalf. The dealer then offers a loan with a markup on the interest rate to make a profit.
If you opt for dealer-arranged financing, you can reduce your risk by shopping like a cash buyer and by getting an “out-the-door” price in writing prior to visiting the car lot. You will be able to compare offers on an apples-to-apples basis, and you’ll be more likely to catch extra fees that might slip into the contract behind obscure initials.
Service
Whether you need an oil change or a more extensive repair, car dealership service departments are able to do the work more efficiently and affordably. They also use genuine parts, which are a better fit for your vehicle. This can improve its longevity and resale value.
Dealerships also have access to the latest diagnostic tools. This allows them to identify problems quickly and accurately. This is not always the case at local mechanic shops.
However, many dealerships leave significant recurring revenue on the table when it comes to customer retention in their service departments. By implementing best practices and using technology like managed live chat, car dealerships can curate better experiences for their customers, leading to increased loyalty and long-term growth.
Parts
The parts department is the most obvious source of revenue and profit for a dealership. This is because they are in charge of keeping a large variety of items that go towards fixing, maintaining and upgrading a vehicle. These departments often have hundreds, if not thousands of unique parts stocked at any given time.
For example, say you blow a tire. You would come to the parts department and they would sell you a new tire, charging you for both the part and the labor of mounting it. This is how dealers make their money and they aspire to achieve’service absorption’ which is 100% of combined department operating gross covering all fixed expenses, dealer salary, and parts inventory.
FORD, as manufacturer of the parts offered on this website and your dealer, reserve the right to change these terms at any time without notice. Parts ordered through this website may be subject to a manufacturer’s warranty, service contract, or other arrangement between you and your dealer.
