When you’re car shopping, you’ve got a couple of choices. You can buy from an independent dealer or you can buy from a franchise dealer. But what’s the difference? A few, actually. Here’s the lowdown on how to understand the differences between an independent dealer and a franchise dealer.
These are the dealerships that often have names like “Bob’s Auto Park” or “Tim’s Used Cars.” They don’t have makes in their title like ‘Ford’ or ‘Toyota’ because they don’t own a franchise from a manufacturer. That’s why they have a large used car inventory and no new cars. Let’s break it down.
- Better prices. The inventory is often older than a franchise dealership, so you’re likely to find an affordable car no matter your circumstances if you look at older models.
- In-house financing. Independent dealers often have in-house financing meaning you finance through them instead of a bank and they’re also known as “Buy Here, Pay Here” stores. They’re more likely to make loans to risky individuals, because if the payments aren’t made they simply repossess and resell the car. If you have bad credit, this may be one of your better options because if you make your payments, it’s a good way to repair your credit. Dealerships that usually offer in-house financing are known
- Certification Programs: Independent dealers can certify a pre-owned vehicle with a 125-point safety inspection (see NIADA for details)
- High interest rates. If you do in-house financing or got to a “Buy Here, Pay Here” store, the interest rates are often around 18% or higher.
- Older cars. It can be difficult to tell the condition of an older car. Mojo Motors offers a Carfax vehicle history report to help you determine a used car’s condition. In some states a mechanic is required to be available for inspection.
- No service departments. Franchise dealers have service departments, but independent dealers usually don’t. While independent repair shops can be cheaper, the mechanics there are less specialized and don’t undergo the same training as a mechanic at a franchise dealership. In a New York Times article, management instructor Robert Atwood at the National Automobile Dealers Association (NADA) argues that the franchise mechanics know the products better and are worth the extra cost.
Most of the time you’ll recognize these dealerships by the franchises included in their names, like “Haley Honda” or ” Sherrie Chrysler and RAM”. These dealers have signed a contract with certain manufacturers and have to adhere to their guidelines for employee training and customer service areas.
- Low interest rates. Franchise dealerships can finance you through their manufacturers’ captive finance companies, like Honda Finance Corp. Because those companies work for the manufacturer, who wants your business, they are more likely to offer you a lower interest rate rather than have you go to a third party.
- Certified mechanics. The employee training required by manufacturers is intensive, and service technicians know their products very well. Most franchise dealers also have loyalty programs, where car owners accumulate points and discounts for getting service and repair work done there.
- Certified Pre-Owned. Franchise dealers can have their used vehicles certified through the manufacturer after an inspection that varies based on the franchise. They also offer warranty programs for these cars.
- Smaller used car inventory. You might not have a large selection of vehicles (but you search on Mojo Motors and compare used cars at multiple dealerships so that’s not an issue). The overall inventory is younger, so you may have trouble finding an older car that might be more in your price range if you have a small budget.
- Good credit mandatory. captive finance companies, while they may offer lower interest rates than a bank, are less likely to take a chance on an individual with bad credit.
So if you’re looking for a younger used car and you’ve got the credit to finance it, you’re more likely to find it at a franchise dealership. If you have a small budget or your credit isn’t stellar, visiting an independent dealer is your best bet. Both types of dealerships offer Certified Pre-Owned warranty programs (see NIADA for details on independent certification). We have inventory from both types of dealerships, so start your search and start ‘Following‘!
Written by Sara Price