Why Do Dealerships Want to Sell You a Car?

The answer to this question is as simple as it is crucial to understand: dealerships are in the business of making a profit. In a world where businesses need to generate revenue, car dealerships are no different. The fundamental reason they want to sell you a car is to make money.

The Business of Autoparts

Dealerships, much like any other business, have to sell products to survive. For the vast majority of car dealerships, their primary product is not just cars—it’s a host of other components and services that make up the car and the broader automotive ecosystem. Some dealerships may also sell used cars, but even this involves additional services such as car maintenance, insurance, and financing.

Consider the analogy of rutabagas. Rutabagas, much like cars, have a specific season during which they are popular and easy to sell. Once that season ends, it becomes more difficult to sell them. In the context of a car dealership, once new cars are in short supply, they look to other areas to boost their sales and profits. This includes the sale of pre-owned vehicles, parts, and accessories. This is why dealerships are constantly on the lookout for new sales opportunities and why they may push certain cars more aggressively when they are more marketable.

Sales Tactics and Revenue Streams

Dealerships employ a wide range of sales tactics to increase their revenue. One of the most common is by offering financing options. Many people believe that dealerships' primary goal is to sell you a car as quickly as possible. While this is often true, the process of financing a car can extend the time you're engaged with the dealership and can significantly increase their profits due to interest charges.

Another strategy is bundling services such as extended warranties, roadside assistance, and maintenance plans. These services can add substantial value, but they also represent additional revenue streams for the dealership. Along with these services, the dealership might also offer specialized financing options that are less favorable to the buyer but more profitable for the dealership.

Understanding and Negotiating

Given that dealerships are in the business of making a profit, it's important for potential buyers to understand these dynamics. This knowledge can empower you to negotiate better deals and ultimately save money.

Some strategies to consider include:

Negotiating the price and terms: Always compare prices from different dealerships and consider negotiating the price of the car and the financing terms. Research financing options: If you're financing the car, shop around for the best interest rates and terms from banks or other financial institutions. Examine the total cost: Don't just focus on the sticker price of the car but also consider all the additional costs associated with purchasing the vehicle. Be cautious with add-ons: While some add-ons can be useful, others are often unnecessary. It's important to understand what you're being charged for and what you might be able to decline.

By understanding the business models of car dealerships and employing smart negotiation tactics, you can make more informed decisions and potentially save a substantial amount of money during the car buying process.

Conclusion

Understanding why dealerships want to sell you a car is the first step towards negotiating a better deal. While dealerships are focused on making a profit, you don't have to let this be the end of your story. Armed with knowledge and the right strategies, you can find a vehicle that fits your needs and your budget.

Frequently Asked Questions

Why do dealerships focus on new cars?

New cars represent the most significant profit for dealerships due to higher margins. However, once the market saturates, they look towards other areas to boost sales and profits, such as used cars, parts, and services.

What are the common sales tactics used by dealerships?

Common tactics include offering financing, bundling services like extended warranties, and imposing less favorable financing terms that maximize profits for the dealership.

How can I negotiate a better deal?

Research prices, compare from different dealerships, and be cautious with add-ons that may not be necessary. Focus on the total cost rather than just the sticker price of the car.

By staying informed and prepared, you can navigate the car buying process more effectively and secure the best possible deal for yourself.