How Do Car Dealerships Actually Work?

Row of cars

If you drive along nearly any main road you are definite to see a number of car dealerships. These stores offer an extensive range of vehicles, both used and new, to the consumer. Their merchandise is one that is not always easy to sell yet they are able to to do a lot of business, or so it appears. If you have ever deliberated on how a car dealership works, then know that your dealerships will work in one of two ways. They will either buy the cars or sell them for a profit or they will get vehicles on consignment to sell.

As a member and alumnus of the industry, Jeffrey Lupient holds membership in the National Automobile Dealers Association.


It is fairly simple the way that consignment works. The firm that owns the vehicles will allow dealerships to keep a number of cars on their grounds and take care of them. Each car has a worth that the company which holds them expects to get for it. It is up to the car dealership to retail the car for more than that price and then to pay for the car that has been sold. Here, both sides run a risk. The firm that owns the cars runs the risk that the cars will not get retailed. The car dealerships run the risk of the automobiles getting damaged or stolen, in which case they would still be accountable for the cost of the car.

Buy to sell

The dealerships will buy the vehicles that they think they can sell, in this car dealership model. Often, they will only purchase one or two of a particular model of car and use this as a demonstrator vehicle for prospective customers to test drive. If a client chooses to purchase a vehicle the car dealership will order exactly what the client requires from the vehicle manufacturer. The car is then vended to the client at a mark-up. On the sale of the demo vehicles, the car dealerships make some loss but they make up for it with the number of cars that they sell brand new with a momentous mark-up. This model is a lot less risky for the car dealership and the vehicle manufacturer.

Second hand car dealerships will usually work on a model that is very analogous to the buy to sell model of new cars. They will purchase automobiles from private individuals, either as a trade in on a new car or for cash, and then sell the car again for a turnover. They do have to be vigilant to inspect the car to guarantee that it is worth what they are offering for it and road worthy. Jeffrey Lupient has recognized himself as an excellent salesman of new vehicles and a specialist in his family business

The interior workings of dealerships are not all that convoluted. You just have to take a second to think about it. If you see a lot of cars on the ground then the dealership is probably working on the consignment method for those cars. If there are only one or two on the floor then it is possibly the buy to sell process at work.