Warehouse Car Buying: Good for the Customer and the Auto Retailer

Car shopping this season? It could be chilly or raining out on a car lot. Here’s an idea—try browsing for a vehicle in one of the many indoor and air-conditioned used car warehouses that are scattered across DFW. Some of these warehouses are loaded with literally HUNDREDS of cars, trucks and SUVS—all parked inside! Every vehicle clean and ready for your close (and climate-controlled) inspection.So, besides being a much more convenient choice than walking a traditional dealership lot, what else is different? Well quite a bit, actually—some of it good and some not so good. Like everything in life, there are trade-offs. You may save a few thousand dollars on your purchase, but you may not get all the benefits.

Great Sales, Minimal Service

Unlike a traditional new car dealership experience, there typically is only a sales organization at a warehouse retailer. They inspect and repair vehicles, and provide financing options, but most only feature a few service stalls for detailing and/or touch-ups before delivery. You will not find a full-blown service, parts or body shop, like you typically find in dealerships and large independent used car operations.

There are exceptions, especially in the larger-format operations where their “fixed” (service, parts, body shop) operations are off-location, away and separate from the warehouse showroom. This matters because if you have mechanical problems with your purchase, you need to know whether or not the warehouse seller will warrant and repair the vehicle. If so, where do you bring your car for service?

In addition, many offer independent service contracts, just like new car dealers. If you purchase a service contract, then you typically take the vehicle to the dealer for repairs. But keep in mind that because you didn’t purchase the vehicle from the dealer, you may not be entitled to any extras that dealership customers sometimes enjoy such as free washes, loaner cars and expedited service.

Land Advantage for the Retailer

As in-fill land becomes more scarce and expensive and building costs continue to escalate, re-purposing existing buildings—in this case, warehouses—has become a necessary and valid alternative. Many of the early adapters, who happen to be automobile retailers, have seen tangible benefits to this new warehouse arrangement. These include:

• The ability to secure the vehicles inside an indoor car showroom so there’s no lot theft
• Less expense in keeping vehicles clean, because they’re only washed once
• The benefit of presenting the vehicle in a controlled environment that is air conditioned and out of the weather

Customer response has been overwhelmingly positive. This model’s success has been validated, and so now, more dealers are considering this choice as a viable alternative. It is certainly one that challenges their traditional car lot mentality, but as a brokerage, Henry S. Miller fully expects the trend to continue.

Customer’s Choice

As in most shopping experiences, this is all about choice. Most warehouse operations have excellent customer service and offer great value for your hard earned money. The “complimentary” services you receive at dealerships cost you plenty, by way of the mark-up in your vehicle purchase. Bottom line: warehouse retailers sell their vehicles cheaper than dealers!

In addition, most warehouse operators have conducted thorough inspections and have completed the necessary repairs on every vehicle. They also offer limited warranties and can provide a list of preferred shops and qualified technicians that are specifically trained to work on all makes and models. So, if you like to kick a lot of tires, enjoy indoor car shopping and might like to consider saving a few thousand on your next vehicle purchase—whether that’s a luxury model, back-to-school ride, or an off-roader—check out a used vehicle warehouse operation.

The information contained in this article is general in nature and should not be construed as financial, tax or legal advice.  As with any financial or legal matter, consult your tax advisor and legal co