Significant Points
* Employment is expected to grow, but will remain sensitive to downturns in the economy.
* Opportunities should be very favorable for automotive service technicians who complete formal training programs.
* Average weekly earnings in this industry are relatively high.
Nature of the Industry
Automobile dealers are the link between the manufacturer of the automobile and the consumers. With their large inventories of cars, dealers provide consumers with a wide array of vehicles to meet their needs at different price points.
Goods and services.
The automobile dealer industry sells most of the automobiles, light trucks, and vans that operate on the road today. Sales of these vehicles are subject to changing consumer tastes, the popularity of the manufacturer’s vehicle models, and the intensity of competition with other dealers. Along with the sale of the car, most dealers also sell additional automobile-related services to potential buyers. These services include extended warranties, undercoating, insurance, and financing. Aftermarket sales departments sell these services and other merchandise after vehicle salespersons have closed a deal. Sales of these packages greatly increase the revenue generated for each vehicle sold. Because sales of automobiles fluctuate significantly, automotive dealers offer generous incentives, rebates, and financing deals during slow periods to maintain high sales volumes and to reduce inventories.
Leasing a car or truck is an alternative to purchasing a vehicle and an additional service provided primarily by new car dealers. Leasing services have grown in recent years to accommodate changing consumer purchasing habits. As vehicles have become more costly, growing numbers of consumers are unable or reluctant to make a long-term investment in a new car or truck purchase. Leasing provides an escape from high initial investment costs and typically yields lower monthly payments than purchasing options.
Performing repair work on vehicles is another profitable service provided by dealers. Service departments at motor vehicle dealers provide repair services and sell accessories and replacement parts. While most service departments perform repairs only, some dealers also have body shops to do collision repair, refinishing, and painting. The work of the service department has a major influence on customers’ satisfaction and willingness to purchase future vehicles from the dealer.
Industry organization
The automobile dealer industry is comprised of two segments. New car dealers, often called franchised dealers, primarily sell new cars, sport utility vehicles (SUVs), and passenger and cargo vans. These franchised dealers sell and lease vehicles manufactured by a particular company—which may include several brands. Used car dealers comprise the other segment of the industry, and are sometimes referred to as independent dealers. These dealers sell a variety of vehicles that have been previously owned or formerly rented and leased. Improvements in technology have increased the durability and longevity of new cars, raising the number of high-quality used cars that are available for sale. While used car dealers by definition do not sell new cars, most new car dealers also sell used cars.
According to the National Automobile Dealers Association, new vehicle sales account for more than half of total sales revenue at franchised new car and new truck dealers. But more importantly, these sales generate additional revenue in other departments of new car dealers, which are more profitable to the dealer. By putting new vehicles on the road, dealers can count on new repair and service customers and future trade-ins of used vehicles.
Independent used car dealers usually have smaller staffs than their franchised counterparts. Most are stand-alone dealers, but increasingly nationwide companies are opening large superstores across the country. These large used car and truck dealers typically contract out warranty and other service-related work to other dealers or to satellite service facilities.
Recent developments
In recent years, the sale of used cars has become a major source of profits for many new car dealers in the wake of shrinking margins on new cars. And to make them acceptable to more customers, some dealers promote “certified pre-owned” vehicles to customers who want a warranty on their used vehicle. This often raises the price, but in return provides customers with peace of mind. In economic downturns, the relative demand for these and other used cars often increases as sales of new cars decline.
Nationwide used automotive dealer chains have increased in popularity over the last decade. Like the used car departments of new car dealers, they capitalize on the relatively large profits on sales of previously owned cars, trucks, and vans. Some of the larger dealers offer low-hassle sales on large inventories of these used vehicles. Growth in leasing agreements and rental company inventory will continue to provide quality vehicles to these large independent dealers, thus providing for future employment growth in the used car market.
In an effort to achieve greater financial and operational efficiency and flexibility, greater emphasis will be placed on aftermarket services, such as financing and vehicle maintenance and repair, at both new and used car dealers. These services typically provide large profit margins for dealers, and remain less susceptible to business cycle downturns. They are also part of an effort to enhance customer loyalty and overall customer service.
Perhaps the most significant recent development for automotive dealers has been increasing use of the Internet to market new and used cars and light trucks. Through websites, consumers can easily access vehicle reviews; view pictures of vehicles; and compare models, features, and prices. Many Websites also allow consumers to research insurance, financing, leasing, and warranty options. As a result, consumers are generally better informed and spend less time meeting with salespersons.
Source: bls.gov, globalgiants.com, blog.nola.com, globalgiants.com, melvyn-rutter.co.uk, streetsideinvestor.com
