Someone just posted a thread about all of the drug stores in one area. My question is regarding car dealerships. We have 5 major dealerships within a 1-2 mile radius. How is it possible that they can all still be in business!? And they’ve all been around for years. They all have rows and rows of new cars and rows and rows of used cars. As I drive by them I always wonder how will they possibly sell all of those cars. I wonder how many customers can possibly come in on any given day. People keep their cars for at least a few years before buying another, most much longer than that. It’s not like a drug store where people need to replenish their aspirin and shampoo every month or so.
Are they all for one brand or are they for five makes and models? I’ve noticed that dealers tend to be clumped together, which makes it easier to to shop different brands.
Car dealerships often group together, because people like to comparison shop. It’s advantageous for them to locate near each other, but they cover a wide area. With enough people in the target area you sell enough cars. People will travel quite a long distance when making a big purchase like a car.
And you can make a big profit on just a few sales, so turnover doesn’t necessarily need to be as high as you might imagine. As of a few years ago the average dealership sold about 1000 cars per year, or 3/day.
I just checked one of the larger car dealers in the area. 16 locations, 2,952 vehicles presently on their lots. Call it 185 cards per dealership. Let’s say 50% of my area’s 2.7 million people drive, and they replace their cars once every seven years. That gives a market for more than 19,000 cars each year. That supports more than 100 of those example car dealers.
It doesn’t always work out, though. Just last week, a new-car dealership had their inventory repossessed and filed for bankruptcy. At the same time, a used car dealer tried a paper-shuffling trick similar to Fargo, and got closed down when it fell apart.
Repairs generate most of their income. Some people think you must go to the dealer for service even though they are typically much more expensive than an unaffiliated place.
Around here we have “automalls” where a dozen or more dealerships will be all grouped together. Ex. Roseville Auto Mall Do you not have these in your area? It’s rare for a dealership to be somewhere all alone, but it does happen.
Maybe not always. About I year ago, I went to an independent repair shop, one that I always trusted, and gave them the manufacturer’s recommended service list for that car and mileage. They charged 50% more than the dealer’s fee, so I’ve been using the dealer ever since, even though the shop is much farther away.
At my Honda dealer, they have a board in the service department listing various common services and how much they charge for them versus various local independent shops. Certainly, they carefully selected the services where they were competitive, but given that one of them is an oil change and that’s about all my car ever needs, I continue to go to the dealer.
Prostrollo Auto Mall. The funny part of that is that Ford made them built a separate building for the Ford sales. All the others are in one building.
it really seems to depend. in my area, the neighborhoods which were built up in the '40s-'50s tend to have more stand-alone dealerships here and there. The later suburbs have bigger clusters of dealerships (such as the Motor Mall in Troy, MI) when they were able to grab bigger plots of land before they were developed.
From what I can tell, one advantage of the “auto malls” is they can air commercials for the mall as a whole, even if the dealerships have differing ownership.
Then there is Billion’s (that is actually the guy’s last name) who handles several makes at several locations, not in an auto mall.
Vern Eide is another one.
In my area a corporation owns several closely clumped dealerships: BMW, Honda, Mini, and Porsche.
They might make small margin on a used Civic, but bank on the guy down the street financing a Porsche at their other lot.
In the poorer part of town there is a street lined with “No credit check! No down payment! Pay $99 a month! We finance!” type joints. I imagine they do well due to accessibility and horrific interest payments.
I buy my play-around track cars old and cheap and I looked on a few of these lots in March that advertised some cars I wanted to look at. They had high-mileage BMWs for $7500 at a 16% interest rate. I bought a similar one with same-ish mileage from Craigslist for $4500 cash. Few folks who are struggling have cash/decent credit and these places are kind of predatory (but do provide a service for people who can’t buy at “regular” dealers – so there’s that).
Each dealership specializes in different brands. One is Subaru, one Dodge, one Ford, etc.
No auto malls around here.
Well there’s your answer, fishbulb. 
But seriously, automobiles are a high-brand-loyalty product. The top 10 car manufacturers all have customer loyalties above 60%. The Ford dealer can set up shop right next to the Subaru and Dodge dealers because those aren’t his customers, he already has his own.
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A goodly number of the dealerships are also owned by one company, like GO Auto for example. In those cases, they WILL get your money irrespective of which dealership you stride into.