The top 100 dealerships in the U.S. account for less than 15 percent of total industry sales. There are 25,000 new automobile dealers, including Audi dealer Oakland, with total sales of $700 billion and approximately 25,000 used automobile dealers with total sales of $70 billion. An automobile dealership usually makes around $30 million a year, with about 500 car dealers in the U.S. ranging around $100 million of revenue annually.
The profitability of a car dealership is mainly dependent on the volume of automobiles and services sold, and the demand for automobiles is mostly affected by interest rates and consumer income, because most automobiles bought have to be financed. There are several factors that determine the interest rate that a consumer can avail of for a car loan. These are: the finance company, the automobile to be purchased, the length of the loan term and the consumer's credit rating.
The consumer can avail of a car loan from a bank, a credit union, or the financing arm of the car manufacturer. The car dealer can also provide the loan and other financing options. Interest rates for buying a new automobile are lower than those offered for purchasing a used car. With regards to loan term length in general, longer terms have higher interest rates. Also, consumers with higher credit ratings are more likely to be offered lower interest rates. It is estimated that only 15 percent of automobile buyers in the U.S. qualify for zero percent loans offered by car manufacturers.
The consumer can avail of a car loan from a bank, a credit union, or the financing arm of the car manufacturer. The car dealer can also provide the loan and other financing options. Interest rates for buying a new automobile are lower than those offered for purchasing a used car. With regards to loan term length in general, longer terms have higher interest rates. Also, consumers with higher credit ratings are more likely to be offered lower interest rates. It is estimated that only 15 percent of automobile buyers in the U.S. qualify for zero percent loans offered by car manufacturers.
Meanwhile, car dealers can also offer insurance to their customers. Guaranteed Auto Protection or GAP insurance is offered to protect loans in case the car is lost because of theft or an accident. Credit life insurance and disability insurance policies can also be offered by the car dealership. Disability insurance can protect the loan in case the borrower is unable to work during the loan term, while credit life insurance covers the remaining balance of a loan in case the borrower dies.
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