December 20

What Is the Difference Between a Franchise Dealership and an Independent Dealership?


The auto-selling industry is a robust one and continues to attract millions of entrepreneurs who want to establish a successful business. According to the most recent statistics, there are an estimated 16,800 franchise auto dealerships in the U.S., and the total sales of new vehicles skyrocketed past $500 billion. Those figures suggest that franchise auto dealerships continue to provide profitable opportunities for those who want to enter the industry. However, owning a car dealership franchise is only one of two means by which you can take advantage of the opportunities in this industry. In fact, some entrepreneurs may choose to open an independent dealership rather than a franchise. To better understand what each of these choices offers you, it’s important to understand how franchise auto dealerships differ from owning an independent auto dealership.

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Also read: Honda dealership


Car Dealership Franchise Elements

When you choose to open a car dealership franchise, you are committing to selling cars made by big, name-brand manufacturers such as Toyota, Mazda, Honda, and Nissan. While you can choose any name you see fit, that name will often include the name brand that indicates to customers that you are an official and authorized franchise dealer who has made a contract with that manufacturer to sell its cars. In other words, a franchise car dealer has the permission and authority to sell cars as a direct agent of a major automaker.


Independent Dealership Elements

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In contrast, an independent car dealership has not made any agreements or contracted with a major auto manufacturer. The names of these independent dealerships typically give away that fact because they will never include the name of a big automaker. For example, you might drive by a dealership with the name “John’s Quality Used Cars,” or “Billy Johnson’s Auto Sales,” which would clue you in that the dealership is not a franchise of a big car manufacturer.


Franchise Dealership and Independent Dealership Differences

In the dealership vs. franchise debate, there are several differences that you must understand. A franchise car dealer sells both new vehicles and used vehicles, whereas an independent dealership will only sell used cars. As a result, one of the biggest differences in a dealership vs. a franchise is that typically, an independent car dealer will have a much broader selection of used vehicles than a franchise dealer. However, franchise dealers that sell used cars will typically offer used cars that are later models and in better condition than those sold by independent dealers. Unfortunately, that also means that most franchise dealers will charge more for a used car than an independent dealer. Another dealership vs. franchise difference is that franchise dealers often feature service departments where technicians can perform a variety of necessary services to keep customer cars running at peak levels. These technicians are trained to work on the auto manufacturer’s vehicles, so their expertise is valuable in detecting problems that are unique to an automaker’s cars. The vast majority of independent dealers will not offer a service department, which means customers are on their own if something goes wrong.

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Dealership vs. Franchise Considerations

If you want to own a dealership that offers primarily new vehicles and also provides service for your customers as well as name-brand recognition, then a franchise would be the ideal choice. If you prefer to buy used vehicles from many different types of auto manufacturers without having to worry about exclusivity, then an independent dealership may be the better choice. Owning an auto franchise dealership means that there are regulations and guidelines specific to the manufacturer that you must abide by every time you lease or sell a vehicle. Those constraints don’t exist when you own an independent dealership, so if you crave that type of freedom, that is an important consideration, as well.

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