The automobile sector is an ever-growing sector of the USA and has a huge market for pre-owned cars. Owning a car dealership is a way to enter this business. To better understand auto dealership and to answer the question which dealership one should go for as this business requires heavy investment all aspects should be looked into.
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Difference Between Independent & Franchise Dealership
- By
- stevetacket
- -01st Sep 2020
What is a car dealership?
An auto dealer is someone who buys automobiles for his business, keeps an inventory of it, and sells it to the customer, acting as a middle person between customer and distributor. Authorized permission to do so is known as the dealership.
A car dealership is a business which sells used or new car depending on the contract signed by the dealer. Car dealers have the option of selling pre-owned cars or both i.e new cars and used cars. What you choose to do will define the dealership you have to take. There are two types of the dealership:
- Franchise Dealership
- Independent Dealership
Franchise Dealership
In franchise Dealership retailer deals in both new cars as well as used cars. The franchise dealer has direct contact with the manufacturer to sell the car. In doing so they have to come in a legal contract with the manufacturer and abide by the rules of the contract. Dealers have to use the name of the maker of the car as their store name.
They also have certified pre-owned cars which can be of any brand irrespective of the contract signed but in a new section, they have to sell the car of the manufacturer in contract with. Dealers can sell different brands of new cars from the same manufacturer. Franchise dealerships also involve after-sale services of the car of the new car as well as the pre-owned cars which may or not have a warranty.
Independent Dealership
In Independent Dealership, dealer deal in used or pre-owned cars that is what this dealership is also called Used car dealership. The dealers can keep whatever types of a used car in the store they want from different manufacturers, and choose the name of business according to their requirement and are free to choose the profit margins. They are not involved in a type of legal agreement with any of the car manufacturers.
Difference between Franchise dealership and Independent Dealership?
| Type of dealership/Parameters | Franchise Dealership
|
Independent Dealership
|
| Legal contract
|
Franchise dealers have to sign a contract to use the name of any car brand and follow all the legal obligation under it | Independent dealers sign no legal contract and are free to do choose whatever car range, size, brands of car, name of the store, etc
|
| Cost | The certified used car cost more here because they have superior models and in better condition than those sold by independent dealers as per the standard set by the car brand owner.
|
The used car cost less here as the models can be of any range and dealers are not obliged to maintain any standard. |
| Service center availability
|
Franchise dealership has a service center available with trained technicians for the maker of cars available in store. | Independent dealership may or may not have the service center, once a car is sold they may not take accountability. |
| Quality of service
|
The quality of the service provide by them is better as they have trained personnel for those cars trained by the manufacturer company themselves for after service. | Independent dealers may not have trained employees for the same as they deal in only used cars. |
| Variety available
|
As they deal in new cars and used car both, variety is limited to maintain quality | A huge variety is available for different make as they buy and sell used cars only. |
| Brands and manufacturer | Dealers can have stock of different brands from the same manufacture in a new car section. | Dealer is free to stock different brands from many different manufacturers in used cars. |
Advantage of Independent dealerships over Franchise dealerships
Independent dealerships do not involve any legal contract to be signed with the maker of the car. They have a huge variety of used cars as they don’t have any particular brand to maintain. The offers generated are more compared to franchise dealerships. The dealer is responsible to make or break his store image according to the services provided by them.
You can start your business with a small store and grow into a huge store so it’s easier to start this dealership. Huge capital investment is not required comparatively and it’s easy to get a loan based on your credentials.
Advantage of Franchise dealerships over Independent dealerships
Franchise dealerships have the name of the car manufacturer attached to it so they already have the required client base which doesn’t come with independent dealerships. There is a preset market for the new car franchise dealers are selling so its easier to start the business. The after car sales service provided by franchise dealers increases the profit.
The investment may be large but it does come with brand image and hence the preset marketing. Franchise dealers can give a customized experience to their buyers as numerous accessories are already present in their inventory. They deal with the manufacturer directly so the profile margin could be adjusted according to you.
Which dealership one should go to Franchise or Independent?
The answer to this lies if one is ok with a legal contract and have no problem following the guidelines, play it safer than Franchise Dealership is for you. On the other hand, if the dealer does not want to be involved in any legal obligation and wants to act according to the rules and guidelines made by self go for Independent Dealership.
