How Do Car Dealerships Work? (What To Know Before Visiting One)

Published on
November 29, 2022

Before you make the big commitment of buying a car from a dealership, it's important to understand how they operate. Most dealerships will offer both new and used vehicles, as well as financing options and trade-in opportunities for those looking to upgrade their car. Prices at a dealership can vary depending on market demands (e.g. used car prices skyrocketing in 2020-2022), make and model of the vehicle, and availability.

It is important to do your own research when it comes to navigating the complex world of car dealerships. So let’s get you prepped with the right information before heading out on your next car-buying venture.

What Do Car Dealerships Do?

When it comes to buying a new car, most people go through a dealership. How does this system work? A dealer's revenue relies on the sale of vehicles, often from multiple manufacturers that they’ve partnered with.

Car dealerships provide a range of services related to the buying and selling of cars. One of their main functions is to act as intermediaries (or middlemen) between car manufacturers and customers, buying vehicles directly from the manufacturer and then selling them to consumers at a markup. In addition, they often offer financing options for buyers and will assist with the trade-in or sale of a customer's old vehicle. Car dealerships also typically have a service department where cars can be brought in for regular maintenance or repairs.

Understanding how dealerships operate can help inform your decisions and potentially lead to a successful no-stress purchase.

How Do Car Dealerships Even Make Money?

Dealerships can make money in many ways, as they often offer financing and push for add-ons like extended warranties and other services. Car dealerships make money through a variety of different sources:

  • Sale of new and used vehicles, financing and providing car insurance options, service and repairs, and even car part sales.
  • Percentage of profit from the manufacturer for each car sold.
  • The final price of the vehicle plus an offer additional services such as extended warranties or accessories.

What Are The Departments At A Dealership?

A car dealership is typically divided into several departments, each with its unique function:

  • The sales department is responsible for meeting with customers and helping them find the right vehicle for their needs.
  • The finance and insurance department assists customers with securing loans and purchasing additional protection plans for their vehicles.
  • The service department handles routine maintenance and repairs, while the parts department stocks and sells replacement components.
  • Finally, the administrative department handles tasks such as scheduling appointments and managing customer records.

Together, these departments work to provide a seamless experience for car buyers.

The Documents You’ll Need To Buy A Car

When buying a car from a dealership, there are several documents you will need to have on hand.

First, vehicle dealerships require proof of insurance before allowing anyone to drive off the lot. This can be in the form of an insurance card or a policy number for the car being purchased. If you don’t have an insurance policy set up before shopping, a sales rep will help you get a car insurance policy while you’re at the dealership.

Next, dealerships will need proof of identification, whic is always in the form of a valid driver's license.

Finally, if you plan on financing your car purchase, the dealership will also require financial documents such as bank statements and pay stubs to determine your creditworthiness and to establish a payment plan. You can finance your payment via the dealership directly or through a bank, credit union, or any other company that provides auto loans.

By being prepared with these necessary documents, buying a car at a dealership becomes a smooth and stress-free process.

Does A Dealership Register Cars For Me?

When purchasing a car from a dealership, it is important to understand how the registration process works. In most cases, the dealership will handle all necessary paperwork and register the vehicle on your behalf. However, there may be additional fees for this service, so it is always advisable to confirm with the dealership before finalizing your purchase.

Keep in mind that if you are purchasing a used vehicle from a private party, you will likely be responsible for registering the car yourself. Before finalizing the sale, ensure that all necessary documents are transferred and that the title is properly signed over to you too. Once this is done, visit your local Department of Motor Vehicles to complete the registration process.

In any case, it is always a good idea to confirm with the dealership before completing your transaction to ensure that all expectations are met. As always, it is important to make sure your vehicle is properly registered to avoid potential fines or legal complications down the road (pun intended).

How Do I Get The Best Deal At A Dealership?

When it comes to purchasing a car from a dealership, it's important to know how they operate to get the best deal. Car dealerships often have sales targets they must reach, so they may be willing to negotiate on a price or throw in extras like free maintenance or extended warranties.

It's helpful to do your research ahead of time and know the market value for the make and model you're interested in, as well as any potential deals or discounts that may be available. It's also wise to shop around at different dealerships and see who is offering the best deal.

Make sure you visit at least three local dealerships before committing to vehicle. And don't be afraid to ask for what you want—informed and assertive negotiation can pay off when it comes to getting the best deal at a dealership.

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Other Common Questions About Dealerships

Do Dealerships Tint Car Windows?

It depends on the dealership you purchase your car from. We recommend checking on this with your dealership and before you commit to adding this onto the final purchase price. Double check to see if you can get your windows tinted for a more affordable price at a local auto body shop.

Do Dealerships Wax New Cars?

It really depends on the dealership and in most cases you could probably save more money just doing this after purchasing your vehicle. Whether or not you do want to get your car waxed, just as in the case with tinting your car, you should shop around to find the right price for your budget.

Should You Get Your Car Serviced At A Dealership?

We recommend weighing your options before committing to a dealership or an independent auto body shop. Dealerships tend to be a safer bet simply because they have dedicated and trained technians who know how to service the make and model of your specific car.

And if you’ve purchased routine repairs as part of the car package, it’s a no-brainer to get your car serviced at that dealership. Yet, i you’re more focused on saving money and didn’t get routine maintanence included in your purchase, then it is best to shop around.

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