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group paper week 1 - Industry Overview Automotive Industry...

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Industry Overview 1 Automotive Industry Overview ECO 360
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Industry Overview 2 Automotive Industry Overview Automotive dealers are the link between the automotive manufacturers and the consumers. Most new car dealers combine vehicle sales with other activities, such as providing repair services, retailing used cars, and selling replacement parts and accessories. These dealers offer one-stop shopping for customers who wish to buy, finance, and service their next vehicle. On the other hand, stand-alone used car dealers specialize in used vehicle sales. Sales of new cars, trucks, and vans depend on changing consumer tastes, the popularity of the manufacturer’s vehicle models, and the intensity of competition with other dealers. The business cycle greatly affects automobile sales: when the economy of the Nation is declining, car buyers may postpone purchases of new vehicles, and conversely, when the economy is growing and consumers feel more financially secure, vehicle sales increase. Consumers are also highly sensitive to the cost of borrowing. Automotive dealers are more likely to offer generous incentives, rebates, and financing deals during slow periods to maintain high sales volumes and to reduce inventories (US Dept. of Labor, 2005). According to the National Automobile Dealers Association, new vehicle sales account for more than half of total sales revenue at franchised new car and new truck dealers (2005). These sales generate additional revenue in other departments of new car dealers. By putting new vehicles on the road, dealers can count on aftermarket additions, new repair and service customers, and future trade-ins of used vehicles. The aftermarket sales department in a new car dealer sells additional services and merchandise after the vehicle salesperson has closed a deal. Aftermarket sales workers sell service contracts and insurance to buyers of new and used cars and arrange financing
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Industry Overview 3 for their purchases. Representatives offer extended warranties and additional services, such as undercoat sealant and environmental paint protection packages, to increase the revenue generated for each vehicle sold.
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