Buying a new vehicle, or even one that’s just new for you, is a major life decision for many of us. As a result, we often put a fair amount of time into researching cars and trucks before ever visiting a dealership. That certainly makes sense, but equally important is understanding who we can buy from and what kind of dealership may be the best fit for our needs. There are three main types, and each has its own advantages for shoppers, as detailed below.
Buy-Here, Pay-Here Dealerships
“Buy-here, pay-here” dealerships are independent businesses that serve a vital role in the used-vehicle marketplace. That’s because many people simply can’t afford to buy a vehicle of any kind with cash, or risky credit history may exclude them from purchasing a vehicle at other types of dealerships.
“The biggest challenge when dealing with the typical buy-here, pay-here customer is their credit. But we all know this going into it. So the next issue we have to overcome is building trust,” says Luke Godwin, general manager and owner of Godwin Motors. “Most buy-here, pay-here dealers look at each sale as a building block for the customer and we try to educate the customer more than other dealerships.”
Many buy-here, pay-here shoppers need a vehicle to perform everyday tasks, and that need is especially critical in areas where access to public transportation is limited. Consider this: According to the 2017 Infrastructure Report Card of the American Society of Civil Engineers, “Despite 81 percent of Americans living in urban areas, only 51 percent of U.S. households reported in 2013 they could get to a grocery store using public transportation.”
These dealers go out of their way to help their customers, too. Dan Reel, owner of Reel’s Auto Sales, says that “you are building a relationship with someone with tarnished credit, which is more than just selling a vehicle. A buy-here, pay-here purchase does not end when you hand the keys to the customers. The relationship lasts 24 to 48 months.”
Darla Booher, president and owner of Deal Depot, notes that her dealership includes a limited warranty, and that taking care of her customers has led to an A+ rating with the Better Business Bureau. “It is very important to us that the customer feel that the vehicle and our dealership is a good fit,” says Booher. “We never try to force the sale.”
For car buyers, these dealerships provide valuable access to independent, one-stop shopping for both vehicles and auto loans. The key is that it’s the actual dealerships that are making the credit decisions – and making the loans – and they’re highly motivated to make the sale as well. While you may encounter tougher loan terms at these dealerships, that reflects the higher financial risks that are associated with buyers who may have less than perfect credit. And without them, a number of buyers would lose the ability to buy a car entirely. Many of these dealers also partner with CARFAX to provide Vehicle History Reports on their inventory, which makes it easier for you to buy with confidence.
Franchised dealerships are at the other end of the spectrum, so to speak, since they focus on selling new cars and trucks. In fact, automakers typically can’t sell their vehicles directly to the public, because state laws won’t allow it. That means that the “official” retail outlets for auto companies (and the only source for new vehicles for most buyers) are franchised dealers. Of course, many franchised dealers also sell used vehicles, and like the buy-here, pay-here stores, many also support their customers by providing CARFAX Vehicle History Reports.
A more distinctive benefit of franchised dealerships comes from their franchise agreements with the automakers. Because of these, nearly every aspect of the vehicle-purchase experience, including the vehicle, is backed by not only the dealership, but also a multi-billion-dollar corporation that’s heavily invested in keeping customers happy.
For example, the sales staff are trained as product experts in their brand’s particular vehicles, and the same is true for the service technicians. This can be particularly important for the long term, since it means access to experts with a specific understanding of your vehicle for routine maintenance and potential repair situations.
As a buyer, you’ll also appreciate that franchised dealerships offer exclusive resources, such as factory-backed financing programs and certified pre-owned (CPO) vehicles that can include a multipoint inspection and an extended warranty.
The traditional independent used-vehicle dealerships can offer some of the same advantages as both the buy-here, pay-here dealerships and the franchises.
For instance, independent dealers live up to their name since they’re unaffiliated with any specific automaker. So, like buy-here, pay-here dealers, they are able to carry a wide range of vehicles from different automotive brands. Compare that to shopping at a franchised dealership. If you visit a Ford dealership, it’s possible that you may not see many used Toyota products on the lot. Yet there’s much to be said for test driving, say, a Ford Focus and Toyota Corolla back-to-back before you make a purchase, and that can be easier to do at an independent dealership that draws its inventory from across the industry.
Many independents also match the franchised and buy-here, pay-here dealerships by teaming up with CARFAX, to provide customers with the knowledge that can only come from a detailed Vehicle History Report.
As for budgetary matters, used-vehicle pricing tends to trend lower at independent dealerships than at franchised ones. This is again partly due to their independent nature, since there are generally lower overhead costs for dealerships that don’t have to spend money getting in sync with automaker preferences. Turning specifically to financing, all dealers can offer the benefits of third-party loans, but independent and buy-here, pay-here dealers may have more lending flexibility since they aren’t limited by franchise restrictions.
When you evaluate the purchase of any vehicle, be sure to consider more than just the type of car or truck you want. Also think about the type of dealership that best fits your shopping style, budget, and financial abilities. This will lead to an overall better and faster shopping experience.