Dealerships pay a wholesale price for vehicles from manufacturers, have some market power in pricing, and operate similarly to securities dealers.
Wholesale price is the term given to the price that dealerships pay for vehicles from manufacturers. This price forms the basis for determining the final retail price that customers pay.
Dealerships have some market power in setting prices, but competition in the retail automobile market ensures that prices remain relatively close to the wholesale cost, except in cases of high demand for specific models.
Used car dealers operate similarly to securities dealers, buying cars at a lower price and selling them at a higher price, earning profits by facilitating transactions and reducing information asymmetry.
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