Franchise vs independent car dealers

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Franchised and independent dealers play very different roles in the automotive market, despite their similarities.

Franchised and independent dealers are different. Franchised dealers have the exclusive right to sell new vehicles to the public for a specific manufacturer or brand, and may also sell used cars. Independent dealers can only sell used cars.

You can usually tell the difference between franchised and independent dealers since only franchised dealers have the brand or manufacturer in their name. For example, Mike Smith Ford or Patty Lou Subaru would be franchise dealers, while places like Great Auto Sales and Superior Used Cars are examples of independent dealers.

Consider all of the options before making the choice, both have their pros and cons.

Franchised dealers have many advantages. Some dealerships or dealer groups are franchised with many different brands, which gives them many roofs in an automotive mall. This usually means that they have a greater choice and you can usually benefit from the additional choices of new vehicles from different manufacturers, all under one roof, so to speak.

Not only do franchised dealerships sell new and used cars, but they also have a financing advantage: they have captive lenders. This is the financial arm of car manufacturers, such as Ford Credit, Toyota Financial Services, and Kia Motors Finance.

Working with captive lenders gives you the benefit of discounts and incentives that you cannot get otherwise. Many automakers offer deals to consumers who finance with them, and some even offer loyalty bonuses for loyal customers. You cannot get these benefits from an independent reseller.

Another benefit of a franchised dealership is Certified Pre-Owned Vehicles (CPOs). These are used cars that are considered to be the best of the best. They often only have a few years with one owner and may have just gone out of the lease. These vehicles are inspected and refurbished to be in their best possible condition when they return to the field and come with a manufacturer’s warranty to help cover unscheduled repairs. This value-added service can also give you more peace of mind.

Independent resellers may have limits. Since independent dealerships don’t have manufacturer backing, they don’t have perks like being able to sell new cars with captive financing. However, this means that they are not beholden to the demands of the automaker. This means used cars can be a bit cheaper to buy here.

You won’t be lucky enough to find a factory CPO car at an independent dealership, but you can find dealership-certified used cars that have been inspected by their mechanic. However, be aware that any service or repair provided with a car certified by a dealer is likely to have an extended warranty included in the price. This adds value to a used vehicle, although you will likely have to come back to the dealership for service.

There is no one-size-fits-all solution. Franchised and independent dealerships provide vehicle ownership opportunities to a wide variety of borrowers and buyers. The biggest difference you can find is in the financing options.

Independent dealers work with third party lenders or borrowers with pre-approved financing. They are also more likely to work with bad credit borrowers, although some captives work with borrowers with lower credit scores, such as Kia Motor Finance. Ford Credit recently dropped its minimum credit score for borrowers who choose to fund longer loans through them.

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