Five Things You Should Know About a Car Dealership Before You Purchase

The Latin phrase caveat emptor, meaning “let the buyer beware,” is commonly accepted as a governing principle of economic exchange. The principle, which demands caution and vigilance on the part of the buyer, is necessitated by another principle known as information asymmetry. Simply stated, buyers usually have less information than sellers and should, therefore, be careful in their purchase decisions. This is something that we want to change within the automotive industry. Naturally, more information is the best way to combat information asymmetry. Specifically, car buyers should know the following five things about car dealerships before making a purchase.

1. Are they an authorized dealership?

Most well known dealerships are authorized by the automotive manufacturer to sell a certain brand of vehicle. Other dealerships have no relationship with a manufacturer and rely entirely on the secondary market to find cars to buy and sell.  Generally speaking, it’s a good idea to avoid these types of independent used car dealerships. Authorized dealerships have an additional layer of accountability to the manufacturer that independent dealerships don’t have. This accountability helps keep dealerships honest and transparent.

2. How long have they been in business?

In a transactional business, longevity can be a sign of good customer care. Companies that are reasonable and honest in their interactions with customers naturally obtain referrals and repeat customers. Car dealerships that exploit customers in pursuit of short-term profit tend not to last very long. Therefore, dealers with long histories and sustained success are usually a safer bet for customers.

3. What is their reputation?

Today, it’s easier than ever to check the reputations of car dealerships. There are a number of online resources that can provide consumer ratings and reviews. It’s important to note that these review sites are more likely to attract dissatisfied customers with an axe to grind than satisfied customers that went happily on their way. For this reason, you shouldn’t make online forums your only source for dealer information. In fact, you may want to request a list of past customer referrals straight from the dealership.

4. What is their policy for ongoing maintenance and support?

The new and used cars sold at all dealerships will eventually require maintenance and repair. You’ll want to select a dealership that stands behind the cars it sells. Preferably, that promise of support would come in the form of a formalized warranty or service contract. Any dealership selling on a straight “buyer beware” platform should be avoided.

5. What standards have they established internally?

A dealership that doesn’t hold itself accountable to any code of conduct isn’t likely to treat its customers very well. Many honest car dealerships have developed a philosophy and established guidelines surrounding customer interactions and financial transactions. These standards can often be found on the website of the dealership. After reviewing those standards, you might even want to quiz your sales representative to see if they’re being implemented beyond a level of basic lip service.

In a typical automotive transaction, the car dealership will have more information than the customer. This asymmetry of information necessitates caution and vigilance on the part of the buyer. The best way for the buyer to be more aware is to gather additional information about the dealership before making a purchase.


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