By Ali Koomen, who spent over a dozen years in the car dealership busines, provides her expert insights
Where do resale lots obtain inventory?
Both the corner used car lot guy and the big resale lot attached to a new car dealership get vehicles via trade-ins, fleet/lease returns, auto auctions and individual sales.
The trades that are taken in by a new car dealership tend to be nicer, late model vehicles. Those that are not in good shape are wholesaled out, and those cars often end up at auction, where the corner lot guys may buy the vehicles. The used car lots take in older units on trade, and many are not suitable for resale.
The big dealer has more capital available than the corner guy, and better connections. When a fleet turn-in comes available, the big guy can say, “Sure, I’ll take all ten of those Malibus.” Meanwhile, the little guy has to be content with buying a few cars at a time, and doesn’t get the financial breaks the bigger dealer would.
The small lots are often approached by individual sellers, and some small lots obtain some of their inventory by chasing the classified ads, whereas the large dealer simply does not have the time to obtain inventory piecemeal.
Is there a better deal to be had at a small lot or a big one?
While the big guy probably paid less for the same vehicle, the asking price is generally higher than the little lot. Of course, when the deal is negotiated, that will help make it appear as if the buyer got a smoking deal.
The resale lots at large dealerships run by the same credo as the new lot does. Hammer the sale, don’t let the buyer get away, push, push, push. That’s not to say that the salesmen at the little lots aren’t going to be pushy, but most of them tend to have a little more ‘good ole boy’ personality than the slick larger lots do. At the large lot, you’re dealing with a salesman, who reports to a manager, who reports to a GM, who reports to an owner/corporation board. On a small lot, the guy that is selling you the car could very well be the owner of the place.
What about finance?
The big dealers have a lot more lending sources at their disposal, but the small lots often specialize in secondary financing (for those with bad credit). However, beware those lots that advertise “buy here, pay here”. That does not mean the friendly owner is financing the purchase out of his back pocket. What it does mean is that the lot is contracted to use a particular secondary lender, one whose interest rates are ridiculous. Often, the BHPH lots require a payment to be made every other week, which means in a twelve-month period the buyer will be making two more payments than he would have with conventional financing. When a car is financed with a BHPH lot, the buyer is on a very short leash, and woe betide one who misses a payment. The BHPH lenders tend to do repossessions a lot quicker than some of the larger banks and lenders.
What about service/warranty work?
The large dealer has the advantage here. Most corner lots don’t have a service department, or if it does, only limited work can be done there. The large lots have comprehensive service areas available, making it easy to have warranty work done by certified mechanics.
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