Why It’s So Important to Have the New Car Dealer Franchise System
The current franchised new-car dealer model has benefited consumers, manufacturers and local communities for nearly a century. It is supported by both dealers and factories as the best and most efficient way to buy, sell, service and finance cars, and consumers benefit from the franchised dealership business model first and foremost on pricing. When local dealerships of the same brand compete for a customer’s business, prices drop, often significantly.
New car dealer franchises create price competition and prevent manufacturer monopolies; protect consumer safety by offering independent safety recall, warranty and repair service; generate good-paying local jobs, tax revenues and economic benefits; and simplify the complex car purchasing and registration process.
Motor vehicles are highly regulated products that require licensing, insurance and financing. These vehicles also must meet numerous environmental and safety standards. All 50 state legislatures have enacted laws governing the sale and servicing of cars, which is usually done by franchised new-car and -truck dealerships. These franchise laws not only protect consumers, but also govern the relationship between dealerships and manufacturers. Dealers also compete on financing, where they have access to multiple lenders nationwide that are all trying to outbid each other. This competition benefits consumers, who usually don’t have access to or the time to pursue such an array of lenders.
And dealers compete on service, parts and collision work, providing consumers with access to professional and certified repairs virtually anywhere at anytime. Consumers also benefit when dealerships take on warranty and recall work. That’s because dealerships get reimbursed by the manufacturers for performing warranty and recall repairs, which enables dealers to make warranty and recall repairs at no cost to their customers.
Local franchised dealerships are also the economic cornerstone of their communities.
When other large companies move in and out of communities, dealers remain, offering goodpaying jobs with opportunities for advancement. More than 8,000 dealership companies operate nearly 18,000 dealerships across the country, and more than half of those companies own only one store. Another 2,000 own only two stores.
Along with the more than 1.1 million jobs at their stores, dealers also support an additional 1.18 million jobs in industries that service and do business with auto retailers. These jobs are critical—especially in providing tax revenue—to the bottom line of many local communities. There is simply no other vehicle distribution system besides the new car dealer franchise that enables every customer to be similarly accommodated throughout the car buying process and the ownership experience, and that is why it is so important to all of us to maintain the new car dealer franchise system!