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Myth -  A dealership is owned by the Manufacturer.

Fact -  A typical dealership is owned by a private company. The manufacturer gives the dealership a franchise over a specific geographic location. The dealership buys cars and trucks directly from the factory.

We all have pre-conceived ideas about how the dealership business model works. Let's seperate fact from myth!

  • Myth - The manufacturer provides the dealership cars and trucks at no cost until the vehicles are sold.
    Fact - Dealers buy their inventory from the manufacturer. To purchase inventory, most dealers will borrow money from a bank or automotive financing affiliate, such as Ally Bank, Ford Motor Credit or Chrysler Credit. As with all loans, interest must be paid every day that the balance is outstanding. There is pressure on the dealership to 'move inventory' to keep the finance costs down.
  • Myth - Only a small percentage of sales at a dealership are leases..
    Fact - Leases make up more than half of the sales at most dealerships. Leases are very popular with dealers because payments are smaller, enabling the dealership to sell you a more expensive vehicle. The dealer can also hide many of the terms of financing from you using a lease. This enables the dealer to make more profit.
  • Myth - The dealership makes most of its money from new vehicle sales.
    Fact - The dealership 'store' as it is known makes profits from four primary areas: (1) New vehicle sales   (2) Used vehicle sales   (3) Finance, Insurance and Warranty Sales   (4) Service Department.   Profits are maximized when the dealership combines profits from two or more of these profit centers.
  • Myth - Dealers are more sympathetic to my needs. They are watching out for my interests by helping me to get a vehicle.
    Fact - Dealerships are in business to maximize profits for themselves. Customers who are financially stressed can be played to increase profits by thousands of dollars.