Why Are Dealerships Located Close to Each Other?

Have you ever wondered why car dealerships are usually located in close proximity to one another? This isn’t a coincidence, and it’s not unique to your town or city. There are several reasons why you can find several car dealerships in one area.

Reasons Why Car Dealerships Neighbor Up

Car dealerships are close to each other for various reasons. Some are economical and strategic, while others are practical.

Common Location Preference

It’s normal for dealerships to be in a popular or accessible location. Expect them near highways, shopping malls, and other high-traffic areas.

Even if you’re not planning to buy a car, seeing dealerships or driving by them every day is a form of indirect marketing.

Zoning Laws

Dealerships could be close to each other because of zoning restrictions in your area.

Zoning laws can limit where dealerships and commercial buildings are built. They’re likely the reason if you see dealerships popping up in the same place in a small town.

Lot Availability

Dealership buildings are usually huge because they need space for their offices and showrooms. Some of them even have a large service area.

Because towns and cities have become more crowded, it can be difficult to find huge lots. Usually, massive lots for sale are near each other.

Common Ownership

Dealerships could be located close to each other because the same person owns them. It’s possible that a single person bought a massive lot and subdivided it into several subplots.

If you’re managing multiple dealerships, it’s probably practical to have them located near each other. It’ll be easy for you to oversee operations without traveling to different locations.

The Hotelling’s Law

Also known as the Principle of Minimum Differentiation, this economic theory suggests that there’s a natural tendency for competitors to be pulled towards a common middle ground.

This theory explains why fast food restaurants like McDonald’s and Burger King are always close to each other. If the customers are looking for a certain product, why not give them the best options all in one place? A healthy competition is good for businesses.

For car dealerships, the proximity also increases their chance of successfully completing a sale.

For example, if potential buyers want a Honda CR-V, there’s a high possibility that they would also check out other alternatives in dealerships close to Honda. From a business standpoint, this gives dealerships more chances to engage with customers and convince them to make a purchase.

What Are the Advantages of This Setup As a Potential Buyer?

From a consumer’s perspective, having dealerships close to each other is beneficial.

For example, if you’re looking for your next new car and you don’t have a particular make and model in mind, checking out the different options available in various dealerships in your area is a smart move.

If the dealerships are near each other, you’ll be able to do multiple test drives in a day. This will save you a lot of time. Also, prices tend to be more competitive if dealerships are next to each other. Salespeople want to finish the sale before you walk away, so you’ll have more negotiating power.

Tips for Car Shopping at the Dealership

If you’re planning to visit different dealerships to look for your next new car, these tips might help you make your experience better:

Make a Plan

Do your research ahead of time. Make a list of the vehicles you would like to check out and set your budget. Decide how much money you’re willing to spend on a monthly car payment (if you’re not paying in full).

Remember that a car purchase shouldn’t be an impulse buy, and knowing all these things ahead of time will help you arrive at a smart decision easier.

Resist Sales Pressure

Keep in mind that a dealership salesperson will show off the vehicles that are readily available at the car dealership lot. If they’re not what you need, be firm. Don’t let the salesperson steer you to a vehicle you don’t want. Ask questions and stick to your preferences.

Request an Itemized Offer

It’s crucial to ask for an itemized offer before signing any contract or making any decision. Some dealers reduce the price during negotiation, hiding extra charges that usually appear when the contract is presented.

Ask for a detailed proposal, which includes the sale price, taxes, registration fees, and trade-in amount. This itemized offer will also be useful if you’re planning to compare them to the offers from other dealers.

Take the Car for a Test Drive

Don’t miss this step. The best way to know if a car is worth buying is to take it for a long test drive. Test its features and drive on different types of roads so that you’ll know how well the vehicle responds.

Read the Fine Print

Take your time. Before signing any contract, make sure that you’ve read every word of the fine print. Ensure that the contact is in accordance with what you discussed to avoid surprises down the line.

Don’t Be Afraid to Walk Away

It’s not easy to decide what car you’d like to drive. Don’t let the salesperson pressure you. If you’re not sure about the deal, don’t be afraid to walk away. Remember that there’s a plethora of options on the market, and you’ll surely find a perfect match for you.