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Why do car companies close dealerships when dealerships buy the cars they sell?
Wiki User
∙ 14y ago
They do not pay for the cars, they finance them, and pay when one is sold. The manufacturers have a lot of cars that have not been paid for and they need the money to operate. Too many dealers and not enough buyers means everybody loses money since each dealer has rent, utilities, payroll, taxes and upkeep expenses. The salesmen work mainly on commission, so no sales mean no income. The service department does not make as much money since they get paid for pre-delivery service and warranty work, but this too is diminishing, so they do not make money there, either. Having less dealers will give the remaining dealers more customers since there will not be as many places to purchase a new car.
Wiki User
∙ 14y ago
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