By Jonathan Collegio, NADA Senior Vice President of Public Affairs
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.
But the reality experienced by local dealerships every day has now been demonstrated through data by economists T. Randolph Beard , George Ford & Lawrence J. Spiwak, who studied thousands of new car transactions in Texas.
In a new study published in the journal Applied Economics, the economists:
“examine[d] how the closeness of a dealer selling the same make and model of vehicle affected the final price…”
and found:
“very strong evidence that the proximity of a same-brand dealer reduces prices significantly.”
According to the study, customers saved an average of about $460 on the price of a new car when dealerships compete in proximity to one another.
The data are in and the data show: When local dealerships compete, consumers win.
Read the study here.
