Used Car Dealers

Elizabeth Morgan
March 13, 2006

While cars depreciate rapidly they do retain some residual value when the loan is paid off, so the services of a used car dealer become important to car owners who want to get a new vehicle, and sell their old one. Used car dealers are primarily engaged in selling old cars, sport utility vehicles, and passenger and cargo vans. They specialize making a margin by buying low and selling high and account for about 1 out of 10 jobs in the industry. After-market sales workers sell service contracts and insurance to buyers and arrange financing for their purchases. Dealers offer extended warranties and additional services, such as base-coat sealer and environmental paint defense packages, to increase the revenue generated for each used vehicle sold.

The used car sales department sells trade-ins as well as cars, trucks, and vans that were formerly rented and leased. This allows them to buy vehicles in larger quantities and creates a steady supply channel of vehicles.

Developments in technology continue to increase the durability and endurance of new cars, raising the number of high-quality used cars available. In recent years, the sale of used cars has become a major source of income for many car dealers in the wake of decreasing margins for new cars.

In fact, some luxury vehicle manufacturers promote "certified pre-owned" vehicles to customers who may be unable to meet the expense of new vehicles of a particular make. In tough economic times, the proportional demand for these and other used cars often increases as sales of new cars go down.

Used car dealerships range from small, single-location stores to large, countrywide superstores, which have developed a good reputation over the last decade. Like the used car unit of any new car dealership, they capitalize on increased demand for used cars and comparatively large proceeds on sales of previously owned cars, trucks, and vans. Some of the larger dealers offer low-hassle sales on large stocks of these popular vehicles. Such dealers typically contract out warranty and other service-related work to other service companies. Growth in leasing agreements provides for future employment growth in the used car market as it creates a steady stream of vehicles to sell.

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