Automobile Dealers Industry Trends

Consolidation

Economies of scale, auto manufacturers’ desire to streamline and strengthen dealer networks, and the high costs associated with entering the franchise auto industry have encouraged the consolidation of small dealerships. The number of new car dealerships has slowly declined for decades to about 22,000, but the number of high-volume dealers has increased. The number of dealers selling more than 750 cars per year increased 14 percent in the past decade to 6,500.

Multiple Franchise Agreements

Partly due to consolidation, dealerships are increasingly entering franchise agreements with multiple manufacturers. Some regional and national dealership owners have agreements with as many as ten different manufacturers.

Nontraditional Sales Techniques

Surveys consistently show that consumers dislike the traditional car buying procedure, which pits them in a contest against mistrusted salespeople to buy a car that often isn't what they really want. GM has tried to improve the buying experience by using its own dealerships to sell cars at fixed prices, and providing computerized links to help dealers find the exact car a consumer wants.

Auto Financing Loans Draw Lawsuits

Unlike home mortgages where lenders must disclose all fees and commissions, car loans can be made without disclosing transactions between lenders and car dealers, which often the consumer pays for. So-called "dealer markups" on car loans go directly to the dealer without the consumer being informed. Several class action lawsuits against the financing arms of manufacturers aim to end this practice.