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Car dealership

A car dealership, or car dealer, is a business that sells new or used cars, at the retail level, based on a dealership contract with an automaker or its sales subsidiary. Car dealerships also often sell spare parts and automotive maintenance services.

In the United States, car dealerships have historically been an important source of state and local sales taxes. They have considerable political influence and have lobbied for regulations that guarantee their survival and profitability. By 2010, all US states had laws that prohibited manufacturers from side-stepping independent car dealerships and selling cars directly to consumers. By 2009, most states imposed restrictions on the creation of new dealerships to compete with incumbent dealerships.


Economists have characterized these regulations as a form of rent-seeking that extracts rents from manufacturers of cars, increases costs for consumers, and limits entry of new car dealerships while raising profits for incumbent car dealers. Research shows that as a result of these laws, retail prices for cars are higher than they otherwise would be.[1]

By 2010, all US states had laws that prohibited manufacturers from side-stepping independent car dealers and selling cars to customers directly.

By 2009, most states imposed restrictions on the creation of new dealerships to compete with incumbent dealerships.

All states impose severe limits on the ability of a manufacturer to terminate a franchise relationship.

Most states prevent manufacturers from engaging in "quantity forcing" whereby manufacturers require that dealers purchase vehicles that they had not ordered.

Most states limit the ability of manufacturers to discriminate between car dealers (for example, by providing better terms to large car dealers with economies of scale or dealers that provide better customer service).

Many state laws impose upon manufacturers the precise terms under which they must compensate dealers for the costs associated with warranty repairs (these can incentivize dealers to increase the price of repairs to customers).

Most state laws require upon termination of a dealership that manufacturers buy back the inventory, special equipment and in some cases pay the rent of the dealer's facilities.

Multibrand car dealers[edit]

Multibrand and multi-maker car dealers sell cars from different and independent carmakers.[35] Some are specialized in electric vehicles.[36]

Auto transport[edit]

Auto transport is used to move vehicles from the factory to the dealerships. This includes international and domestic shipping. It was largely a commercial activity conducted by manufacturers, dealers, and brokers. Internet use has encouraged this niche service to expand and reach the general consumer marketplace.

Genat, Robert (2004). The American Car Dealership. Motorbooks International.  9780760319345.

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EU car dealership reforms