Franchise vs. Independent Car Dealers

By

Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, Automotive Content Editor - December 20, 2023

Franchise and Independent dealerships play very different roles in the automotive marketplace, despite their similarities. Both can get you into a vehicle, but if you're looking for something new, only one option can help. Here's what we know about the differences between franchise and independent dealers.

Franchise and Independent Dealers are Different

Franchise dealerships have exclusive rights to sell new vehicles to the public for a specific manufacturer or brand, and can also sell used cars. Independent dealers can only sell used cars.

You can usually tell the difference between franchised and independent dealerships since only franchised dealers have the brand or manufacturer in their name. For example, Mike Smith Ford, or Patty Lou Subaru would be franchised dealerships, while places like Great Auto Sales, and Superior Used Cars are examples of independent dealers.

Consider all the options before making the choice, both have their benefits and their drawbacks.

Benefits of Franchised Dealerships

Some dealerships or dealer groups are franchised with many different brands, which gives them many rooftops in an auto mall. This typically means they have a bigger selection, and you can usually benefit from the additional choices of new vehicles from different manufacturers all being under one roof, so to speak.

Not only do franchised dealerships sell both new and used cars, but they have an advantage when it comes to financing, too – they have captive lenders. These are the financial arm of the automakers, such as Ford Credit, Toyota Financial Services, and Kia Motors Finance.

Working with captive lenders gives you the advantage of discounts and incentives you can't get otherwise. Many automakers offer deals to consumers who finance with them, and some even offer loyalty bonuses for repeat customers. You can't get these perks at an independent dealer.

Another benefit of a franchised dealership is certified pre-owned vehicles (CPOs). These are used cars that are considered the best of the best. They're often only a few years old with a single owner and may have just come off-lease. These vehicles are inspected and refurbished to be in the best shape possible when they return to the lot and come with a manufacturer-backed warranty to help cover unexpected repairs. This value-added service can also give you more peace of mind.

Independent Dealership Limitations

Since independent dealerships don't have the backing of the manufacturer, they don't have perks like being able to sell new cars with captive financing. However, this means they aren't beholden to the automaker's requirements. This means used cars may be a little less expensive to purchase here.

You won't have the chance to find a factory-CPO car at an independent dealership, but you may find dealer-certified used cars that have been inspected by their mechanic. However, know that any service or repair that comes with a dealer-certified car is likely to have an extended warranty rolled into the price. This does add value to a used vehicle, though you're likely to have to come back to the dealership for service.

Which Option Is Right for You?

Both franchised and independent dealers offer opportunities for vehicle ownership to a wide range of borrowers and buyers. The biggest difference you may find is in the financing options.

Independent dealerships work with third-party lenders or borrowers with pre-approved financing. They're also more likely to work with bad credit borrowers, though some captives do work with borrowers who have lower credit scores, like Kia Motor Finance. Ford Credit recently dropped its credit score minimum for borrowers who choose to finance longer loans through them.

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, Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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