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A car dealership, or car dealer, is a business that sells new or
used cars, at the
retail
Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...
level, based on a dealership contract with an
automaker or its sales
subsidiary
A subsidiary, subsidiary company or daughter company is a company owned or controlled by another company, which is called the parent company or holding company. Two or more subsidiaries that either belong to the same parent company or having a s ...
. Car dealerships also often sell spare parts and
automotive maintenance services.
History of car dealerships in the United States
The early cars were sold by automakers to customers directly or through a variety of channels, including mail order, department stores, and traveling representatives. For example,
Sears made its first attempt at selling a gasoline-engined chain-drive high-wheeler in 1908 through its mail-order catalog and starting in 1951 the
Allstate
The Allstate Corporation is an American insurance company, headquartered in Northfield Township, Illinois, near Northbrook since 1967. Founded in 1931 as part of Sears, Roebuck and Co., it was spun off in 1993 but still partially owned by S ...
through select its stores and the catalog.
The first dealership in the United States was established in 1898 by
William E. Metzger
William Ernest Metzger (September 30, 1868 – April 11, 1933) was an automotive pioneer and salesman from Detroit. He opened one of the first automobile dealerships in the United States, and participated in the early development of a number of e ...
. Today, direct sales by an automaker to consumers are limited by most states in the U.S. through franchise laws that require new cars to be sold only by licensed and bonded, independently owned dealerships. The first woman car dealer in the United States was Rachel "Mommy" Krouse who in 1903 opened her business, Krouse Motor Car Company, in
Philadelphia
Philadelphia, often called Philly, is the largest city in the Commonwealth of Pennsylvania, the sixth-largest city in the U.S., the second-largest city in both the Northeast megalopolis and Mid-Atlantic regions after New York City. Sinc ...
,
Pennsylvania
Pennsylvania (; ( Pennsylvania Dutch: )), officially the Commonwealth of Pennsylvania, is a state spanning the Mid-Atlantic, Northeastern, Appalachian, and Great Lakes regions of the United States. It borders Delaware to its southeast, ...
.
Car dealerships are usually franchised to sell and service vehicles by specific companies. They are often located on properties offering enough room to have buildings housing a showroom, mechanical service, and body repair facilities, as well as to provide storage for used and new vehicles. Many dealerships are located out of town or on the edge of town centers. An example of a traditional single proprietorship car dealership was
Collier Motors
Collier Motors is a private car dealership primarily selling cars built by American Motors Corporation (AMC) as well as with other makes. The business was for many years an AMC franchised dealership located on business U.S. Route 117 in Pi ...
in North Carolina. Many modern dealerships are now part of corporate-owned chains with hundreds of locations. Dealership profits in the US mainly come from
servicing, some from
used cars, and little from new cars.
Most automotive manufacturers have shifted the focus of their franchised retailers to branding and technology. New or refurbished facilities are required to have a standard look for their dealerships and have product experts to liaise with customers.
Audi
Audi AG () is a German automotive manufacturer of luxury vehicles headquartered in Ingolstadt, Bavaria, Germany. As a subsidiary of its parent company, the Volkswagen Group, Audi produces vehicles in nine production facilities worldwide.
Th ...
has experimented with a hi-tech showroom that allows customers to configure and experience cars on 1:1 scale digital screens. In markets where it is permitted,
Mercedes-Benz
Mercedes-Benz (), commonly referred to as Mercedes and sometimes as Benz, is a German luxury and commercial vehicle automotive brand established in 1926. Mercedes-Benz AG (a Mercedes-Benz Group subsidiary established in 2019) is headquartere ...
opened city centre brand stores.
Tesla Motors
Tesla, Inc. ( or ) is an American multinational automotive and clean energy company headquartered in Austin, Texas. Tesla designs and manufactures electric vehicles (electric cars and electric truck, trucks), battery energy storage from ...
has
rejected the dealership sales model based on the idea that dealerships do not properly explain the advantages of their cars, and they could not rely on third-party dealerships to handle their sales. However, in the United States, direct manufacturer auto sales are prohibited in almost every state by franchise laws requiring that new cars be sold only by dealers. In response, Tesla has opened city centre galleries where prospective customers can view cars that can only be ordered online. These stores were inspired by the
Apple Stores. Tesla's model was the first of its kind, and has given them unique advantages as a new car company.
Dispute
At least one study has found that franchises increase car costs.
Additionally, the issuance of new dealership licenses is subject to geographical restriction; if there is already a dealership for a company in an area, no one else can open one. This has led to dealerships becoming in essence hereditary, with families running dealerships in an area since the original issuance of their license with no fear of competition or any need to prove qualification or consumer benefit (beyond proving they meet minimum legal standards), as franchises in most jurisdictions can only be withdrawn for illegal activity and no other reason.
This has led to consumer campaigns for establishment or reform, which have been met by huge lobbying efforts by franchise holders. New companies trying to enter the market, such as
Tesla, have been restricted by this model and have either been forced out or been forced to work around the franchise model, facing constant legal pressure.
Multibrand car dealers
Multibrand and multimaker car dealers sell cars from different and independent carmakers. Some are specialized in
electric vehicles
An electric vehicle (EV) is a vehicle that uses one or more electric motors for propulsion. It can be powered by a collector system, with electricity from extravehicular sources, or it can be powered autonomously by a battery (sometimes cha ...
.
Auto transport
Auto transport is used to move vehicles from the factory to the dealerships. This includes international and domestic shipping. It was largely a commercial activity conducted by manufacturers, dealers, and brokers.
Internet
The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, pub ...
use has encouraged this niche service to expand and reach the general consumer marketplace.
See also
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Auto auction
Auto auctions are a method of selling vehicles based on an auction system. Auto auctions can be found in most countries and are usually exclusive to licensed automobile dealers. In a few countries, such as Japan, auto auctions are well known and ...
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Auto row
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Automaker
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Car broker
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Car rental
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List of auto dealership and repair shop buildings
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Showroom
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Used car
Organizations
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AutoBidsOnline
AutoBidsOnline is a research portal and online car buying site based in Dallas, Texas. It allows consumers to research new car prices, compare new cars for sale and bid for the price of their new car online. The company also provides lead genera ...
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Carfax
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Kelley Blue Book
Kelley Blue Book is an Irvine, California-based vehicle valuation and automotive research company that is recognized by both consumers and the automotive industry. The company is owned by the Cox Automotive subsidiary of Cox Enterprises.
Histor ...
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Federation of Automobile Dealers Associations of India
Founded in 1964, Federation of Automobile Dealers Associations (FADA) and pronounced as F A D A, is the apex national body oAutomotive Retail Industryin India engaged in the sale, service and spares o2/3 Wheelers Passenger Cars, UVs, Commercial Veh ...
(FADA)
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National Automobile Dealers Association
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Presidential Task Force on the Auto Industry The Presidential Task Force on the Auto Industry was an ''ad hoc'' group of United States cabinet-level and other officials that was formed by President Obama to deal with the financial bailout of automakers Chrysler and General Motors.
Based on a ...
References
Further reading
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External links
EU car dealership reforms
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