Car
dealerships in the USA:
In the United States, a car dealership is a retailer that
sells new and/or used
cars. Used car dealerships carry cars from many different
manufacturers, 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.
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In 2006, there are approximately
26,700 new car dealerships in the United States, accounting
for $684 billion
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. Negotiations from the dealerhip's perspective
is often referred to as "desking" a deal.
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Profit margins on 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 (called flooring or floorplaning). On the
other hand, manufacturers pay "hold-back" payments
as incentives to dealers who reach sales targets, thus improving
the fiscal stability of dealers.
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