Car dealerships in the United States
In most cases, dealerships provide car maintenance and repair services as well as trade-in, leasing, and financing options for customers.
Under U.S. federal law, all new cars must carry a sticker showing the offering price and summarizing the vehicle's features.
[4] Salespersons, predominantly those who only work on commission, 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.
The salesperson then brings the offer, plus a sign of good faith from the customer, which can be a check with a deposit or a credit card, to the sales manager.
A percentage of people believe that desking is part of the negotiation process, it only occurs once the salesperson has a legitimate offer on the vehicle from the customer and can hand the sales manager a token of good faith, as noted.
[6] Hold-back is usually not a negotiable part of the price a consumer would pay for the vehicle, but dealers will give up the dealer holdback to get rid of a car that has been sitting in its inventory for a long time, or if the additional sale will bring them up to the manufacturer's additional incentive payments for reaching unit bonus targets.
[8] The holdback allows dealerships to promote at- or near-invoice price sales and still achieve comfortable profits on such transactions.
It empowers buyers with knowledge of the features of comparable cars and the prices and discounts offered by different dealers within the same geographic area.
[11] However, most of these values are estimated from a theoretical chart that may or may not be based on recent average sales prices of a particular make and model.
If a particular make and model has less accurate data available from recent auction prices the dealer will be more cautious in the appraisal of the car.
There have been some scandals involving discriminatory or predatory lending practices, and as a result, vehicle financing is heavily regulated in many states.
This means that the installment loan contracts are immediately "assigned" or "resold" to third-party finance companies, often an offshoot of the car's manufacturer such as GM Financial, Ally Financial, or banks, which pay the dealer and then recover the balance by collecting the monthly installment payments promised by the buyer.
Under this type of service agreement, there is usually no incentive for the dealer to do anything but repair the car as reimbursement from the manufacturer is usually profitable.
This money collected by the dealer from the consumer is put in a "reserve" fund for the length and/or term of the service contract.
Some other pro-advocates say the monthly obligation on leases is cheaper because there are no sales taxes on the vehicle as opposed to the amount a buyer may pay if they are making loan payments on a new or used car purchase.
New car dealerships are more likely to provide these services since they usually stock and sell parts and process warranty claims for the manufacturers they represent.
Maintenance is typically a high-margin service and represents a significant profit center for automotive dealers.
However, laws in many U.S. states prohibit manufacturers from selling directly, requiring customers to buy new cars through a dealer.
[17] Studies have found that some auto dealerships charge higher interest rates or otherwise raise their prices to females and ethnic minorities, including Asians, and African Americans.
