The economics of used car dealerships

… and auto repair stores, and auto parts stores, and other businesses that have something do to with motor vehicles - the topic of this post.

I’m writing a comprehensive land use plan for an exurban community. THe main road through the town has a disproportionately large number of small businesses that, in some way, deal with motor vehicles and internal combustion engines, ranging from auto parts stores to auto body shops to used car dealers.

I’ve noticed a similar land use pattern throughout the United States; in the outermost suburbs – really, distant rual communities that are just beginning to experience suburban development – the percentage of businesses related to motor vehicles is much higher than in older suburbs or the inner city. I have a few thoughts on why such a development pattern is common:

  • Sewer and water may nto ba available, and auto-related uses usually don’t consume lots of water.
  • Land is cheaper, and it’s easier for someone to open a new business.

The thing I’m trying to understand more about is … why cars? There’s a saying that “retail follows rooftops,” but is there really a demand for a used car dealership for every 250 to 500 residents? I never see anybody shopping at these stores, so how do they stay in business? Is there a cultural factor?

Pretty much, I’m trying to discern the “freakonomics” of small vehicle-related businesses and their tendanciy to agglomerate in exurban communities. Can anyone enlighten me further?

This is just a conjecture based on personal experience, and it may have some bearing.

When I was poor I was a customer of all kinds of places just like you describe. Used car dealerships not affiliated with new car dealerships; garages that may be cheaper; parts stores to keep my clunker running; things like that. Since I’ve become fully middle class, I can afford to drive something that doesn’t break down all the time and hence no need for parts and stickers that say “turbo” on them. Washer fluid and wipers I can get at the grocery store. If my car does have problems, the dealer can take care of them.

So that’s my theory for the types of customers that frequent various types of places. Now, where do these people live? Typically small towns and the outermost suburbs have historically been poorer areas. In my area, the city and inner-ring suburbs are also poorer and have the same zones as you describe, so I’ll include them. The middle suburbs have always been the most middle-middle to higher-middle class, the types of people who appreciate that it’s a lot simpler to pay someone to change their oil than do it themselves.

Of course I’m making very vague generalizations here, but it’s been my personal experience.

IANAEconomist, but I would think one would locate an auto dealership, new or used, to the far reaches specifically because there is less population density. Since they likely have to store inventory outside, said inventory is available for theft or vandalism. On an open lot in the relative boondocks, it is easier to see if there is a person (or persons) on the lot at night.

There are also quite a number of urban used car lots dotted around [the buy here, pay here places], but these aren’t the sprawling centers to which you refer. I see many of these corner lot used car lots around here. Not sure I’d -buy- a car from them though.