With almost 12,000 outlets in UK, car dealerships will act as a marketplace to buy and sell any vehicles including cars, bikes or vans.
You may find car dealerships with vehicles from lots of different manufacturers, both brand new and used (e.g Bristol Street Motors, Currie Motors). Or you may that the car dealership is specifically for one type of manufacturer (e.g Citygate and VW or Barons and BMW).
Either way, you cannot typically buy a car directly from the manufacturer’s product line and instead you are likely to go through a car dealership – and there is always like to be at least one in your area or nearby.
How do car dealerships get their inventory?
Car dealerships will have a number of cars available and some ready to go. The manufacturer (such as Mercedes or BMW) does not give up their inventory for free – there are a number of ways this can be arranged.
In most cases, the dealership pays rent for every vehicle they wish to sell, whether it is for 1 month, 2 months, 3 months or longer. This is known as floor plan financing; they essentially pay to put the vehicles on their floor plan.
For this reason, car dealers will do better when they can sell their stock quickly, because if they are paying £50 a month for it, it helps to close the deal early, rather than letting another £50 accrue each month.
You will also hear about dealerships looking to shed stock, because after a while, if they cannot sell the vehicle, they are left with cars that are costing them more to keep.
The amount of inventory that a dealership can take will depend on many factors such as their budgets, their demand for the products, the supply of the vehicles and if there are any deals from the manufacturer.
For people starting out a new car dealership, they may take out a bank loan to initially purchase all the vehicles, or they may start small and gradually build it up. Or perhaps they might take out a loan and they use the vehicles as collateral.
How do car dealerships make money?
Car dealerships make money based on selling the vehicles either on finance or outright and they can generate good revenue from selling servicing packages too.
The ability to sell stock sooner rather than later and also at the best prices is how car dealerships will be financially successful.
There are a range of car finance arrangements available, including Personal Contract Hire (PCP), Hire Purchase (HP) and Personal Loans. Find out more about the different types of car finance.
To earn the best margins, the dealer might agree a higher fee with the motorist (which may have been more negotiable) and secure longer term agreements of 4 or 5 years, since these will involve paying more interest long-term.
Other good opportunities for dealers are when they can pick up on a part-exchange deal, often buying back the car from a customer for a rate below market-value, which the customer agrees to for the convenience. This car can then be serviced and re-sold as used and for a higher price than purchased.
Servicing is big business too, with motorists having an annual service and also paying for any dents, dings and scratches due to road accidents – and these are sometimes paid for by the driver or via their insurance provider.
How can you protect yourself from car dealerships overcharging?
You have to remember that as a buyer, you are always in a position to negotiate. By researching beforehand, either online or using car magazines, you can get a good idea of how much you should be paying for the new vehicle. You should have this information on hand and ready to use when negotiating.
You should also make yourself familiar with all the different types of car finance, understanding that something like PCP might be cheaper short-term, but more expensive if you wish to own the car outright.
In addition, if you are looking to part-exchange your vehicle, you will typically earn less if you sell it directly to the dealer, since you are paying for convenience. Meanwhile, you could make a few hundred or thousand more if you sell the car privately.
How do car dealerships work with Quick Car Finance?
At Quick Car Finance, we are passionate about helping motorists across the UK to find the best rates on car finance and avoid being overcharged by car dealerships and other third parties.
Our budget calculator will show you the best prices for your dream vehicle based on 48 different tiers of car finance – and we ensure that this is the lowest price possible with no mark-up or commission added.
Once the application is completed and your finance has been approved, we simply transfer this to the dealer of your choice.
We have personally checked a number of reputable car dealerships across the country – so that you know that you are in safe hands. You can always use your own dealership, if you prefer! For more information, simply contact us at [email protected]