Car dealership locations have an effect on vehicle price reductions, according to a recent peer review published in the Journal of Applied Economics.
The new study showed that there is strong evidence suggesting that the proximity of same-brand dealers can slash vehicle prices significantly to bring in more customers, according to an article published by the National Automobile Dealers Association.
“In automotive circles, it’s a well-known fact that when local dealerships compete for customers, price competition kicks in and the result is lower prices for consumers on new cars and trucks,” Jonathan Collegio, NADA Senior Vice President of Public Affairs, wrote on NADA’s website.
The study, which was based on numerous new car transactions in various dealerships within the state of Texas, revealed that customers saved approximately $460 on an average when store locations are near each other. “When local dealerships compete, consumers win,” Collegio added.
The NADA served as a key contributor to the study conducted by economists T. Randolph Beard, George Ford and Lawrence J. Spiwak.
While this recent research showed that dealership proximity can lower vehicle prices for the consumer, the current global chip shortage, which is caused by factory shutdowns due to the COVID-19 pandemic, has subsequently resulted in an increase in car prices.