March 14th 2023 – BRANDON MS – Ths is an opinion piece, so take it as you will. However, it states plenty of facts that we hope you consider. We were sent quite a bit of the info, and put it together in this article. A clarification note: No auto dealer provided information for this article.
Brandon has a few car dealers. There was also a recent ground-breaking ceremony for a new dealer scheduled to open in Brandon. There’s also speculation of a possible new dealer being located in the future in the new development adjacent to The Home Depot. Due to this, there seems to be a sentiment from many of “no more car dealers”. If that’s what you’re thinking as well, we hope you at least consider the information in this article. For this discussion, we’re primarily referring to franchise (new) auto dealers, but much of this also applies to independent used car dealers as well:
- Automobile dealers provide a valuable product – nearly every adult needs or owns a vehicle, and some have multiple vehicles. Even if someone cannot afford a $60,000 new vehicle on a new car lot, they usually also carry much lower priced used cars, or they trade such cars in and provide (sell) them to other independent dealers in the area.
- Automobile dealers provide a valuable service – they hire and train dozens of service technicians each year. Nearly every vehicle owner at some point utilizes the service department of a franchise auto dealer. Imagine if you bought a vehicle make that did not have a dealership within an hour drive (or would you?). Many make vehicle buying decisions partly due to geographic proximity of a dealer network. Many will not buy a new car if the nearest dealer for that make is 2 hours away. Having many dealers in an area serves to provide consumers with options.
- Automobile dealers often have 30 to 70 or more employees, from entry level positions, to management positions, to executive positions… many with strong wages which are often spent right back into the economy where the dealership is located. Many of those employees buy houses and go to dinner in the same area in which they work. When they need medical care, they go to a clinic or doctor here in our area (some of us work in healthcare, right?). When they join a church, they’re more likely to join one close to their work and/or home.
- Sales / Life Training – Even if someone doesn’t work at a car dealership their entire life, it often provides valuable training for other jobs. Check around and talk to many successful people in other professions. Many may have received training in the car business. Many car dealers, with the help of auto manufacturers, provide robust training which may be used in other industries and life.
- They’re flexible – Car dealers work enormous hours, for the benefit of selling but also for the public. Dealers are typically open past normal business hours, for the convenience of shoppers. Need a car delivered on a Sunday, or on Christmas Day, or 50 miles away, or at 10pm to surprise your spouse who works a late shift? Go talk to a dealer about it… we bet they’ll do nearly anything possible to accommodate the request.
- Budget – Dealers spend a crazy amount of money on things, including marketing and advertising. Ever seen a new car dealer that has a bad parking lot? Not usually… that puppy is usually paved very well, or it’s more expensive concrete (where do you think they got the materials and vendor for that?). Ever seen a new car dealer with a shotty building or showroom? Not usually. They spend tons of money on the best of everything, including large showrooms, the best equipment, desks, office equipment, carpet and other flooring, computers, furniture and TV’s for their waiting areas, etc. Dealers often contract with auto detail shops, glass companies, tire shops, janitorial suppliers (they go through a lot of chemicals), etc. Nearly every vehicle in a dealer’s inventory gets a full detail, nearly always from a local vendor. Any and all the money they spend often goes right back into the local economy. Besides their infrastructure and upkeep, you may be surprised at what they spend on marketing and advertising. Look around at billboards, magazines, newspapers, TV ads, radio ads, digital ads… car dealers are very often advertising via these platforms. Local account executives at billboard companies, magazines, TV, and radio LOVE car dealers. Sure, new car dealers often receive co-op advertising money from their manufacturers. But regardless of source, those funds are usually spent right back into the local economy. Been to a Brandon baseball game, or football game? Look around at the signage, on the scoreboard or concession stand area. Yep, car dealers. Been to the front entrance of Brandon High School? Yep, there’s signage there from a couple car dealers there too. Enjoyed any concerts at the Brandon Amphitheater? Yep, look around there too. Last we were there, we saw some pretty big signage ($$) for at least one car dealer. Go take in a MS Braves baseball game. While you’re there, look around at the signage.
Car dealers spend BIG money on marketing, much of which goes right back into OUR economy. We’ve even seen a car dealer have a sign for “Adopt A Highway”. In case you didn’t know, most dealers do not own their vehicle inventory out-right. They “own” their inventory via a floorplan or line of credit. Some dealers pay more floorplan interest in a year than you may pay on your own home in 30 years. That interest goes back to the bank or manufacturer’s floorplan, or funding source… in other words, back into the economy. Speaking of budget, a car dealer has to maintain LOADS of insurance. They have liability insurance, property insurance, cyber protection (they often handle sensitive info of customers), garage keepers insurance, garage liability insurance, and more. Ask an local insurance agent if they’d like to have a car dealer or two as a client. That’s a pretty nice agent commission, which goes back into the local economy.
- Contributions, Donations, and Sponsorships – Car dealers get INTO the local market. What do we mean? They don’t just advertise here, their owners usually live here (or at least their executive management and staff lives here), they join business associations, business groups, they get involved with the city and community, they spend big money advertising (see #6 above), they volunteer to serve on boards of organizations, they nearly always bank locally and maintain deposit accounts that would astonish many (ask a banker if they want a car dealer as a client), their staff and families join local churches, their children attend local schools, they eat at local restaurants, they live in our neighborhoods, etc. They’re usually pretty quick to make a donation, sponsor a fundraiser, sponsor a local youth sports team, etc. They’re not Amazon, Target, or Walmart (yes, we know some of them give back as well), but we don’t usually see those businesses sponsoring a local sports team. Car dealers are real people, they’re usually pretty out-going (seen some of their goofy TV commercials?), they can become good friends, and they nearly always “give back”.
- They don’t steal property – Yes, we’re being a little sarcastic here, BUT a car dealer typically pays handsomely for a piece of property, and that property is larger than what a typical business would normally buy. Ever seen a new car dealer on ½ an acre or in an 1,800 square foot retail slot? Nope. A single franchise new car dealer (a dealer who sells just one car brand) may have a facility that requires 4 to 10 acres. A multi franchise location commonly sits on 8 to 12 acres. They don’t usually erect a new car dealership out in the middle of nowhere either. Nope, they’re in high visibility places, often with lots of traffic. That’s by design. And it makes those properties worth a whole lot more, thus cost more to obtain. Car dealers don’t usually buy property “out from under” someone, or buy blighted property. No, they often buy a large plat of land and build a dealership where the property was otherwise empty and may have been empty for many years prior. In a free market, they typically obtain the property fairly and by paying handsomely. If a dealer pays $1.5 million for a commercial plat, those funds go the seller (usually someone local) and most of the time a real estate agent receives a very nice commission. Then a local contractor begins the process or building the dealership, sourcing materials, etc. To put it bluntly, if someone else wanted to buy the property before a dealer bought it, they very likely had plenty of opportunity to do so.
- Sales Tax – We’re NOT picking on restaurants, as we LOVE restaurants (see EAT042.com, as well as many of our articles and posts on Facebook and our website). But it’s a great way to compare the sale tax discussion, as everyone can relate to sales tax on items they buy every day, including going out to eat. The average “sit-down” restaurant may have about $750,000 in annual sales. Locally, sales tax is 9%, with various amounts going to different entities (that’s a different story). So the sales tax paid by that average restaurant is about $67,500 ($750k x 9%). Keep that in mind, when considering the following figures. The average new car dealer in Mississippi had about $46 million in sales in 2021 (the most recent data available from NADA, which is worth noting was also a “Covid” year). Locally, sales tax on autos is 5%. So the sales tax paid by that average Mississippi auto dealer is about $2.3 million per year… or nearly $200,000 per MONTH. But wait, there’s more… haha. Nationwide, service and parts make up 11% of sales at a new car dealership. Service and parts carry a 7% sales tax locally. So let’s recalculate that quickly:
$46 million in total sale x 11% (S&P) = $5.06 million (S&P sales) x 7% sales tax = $354,200
$46 million in total sales – $5.06 million (S&P) = $40.94 million in vehicle sales x 5% sales tax = $2.047 million
So that’s a total Sales Tax for the average MS New Car Dealership of: $2,401,200 or just over $200k per MONTH
Based on these figures, you can see that an average Mississippi new car dealer pays about 3 times more sales tax in a MONTH than the average restaurant pays in a YEAR… or 35x more in a month than a restaurant does in a month. So in sales tax “speak”, a new car dealer is similar to opening 35 restaurants. ONE new car dealer can equal 35 restaurants.
AGAIN, we’re not picking on restaurants, as we LOVE restaurants. We’re just using their industry as a comparison, because nearly everyone can relate to it. Yes, we understand that currently, the City of Brandon directly receives 2% tax on restaurants, in addition to the regular revenue split on the remaining 7%. To try to explain the differences in that and how it relates to sales tax on auto sales is simply beyond the scope of this article. Does it mean Brandon actually receives a little more sales tax on a restaurant than it does percentage wise from a car dealer? Sure… but the sheer volume of sales from a typical car dealer still dwarfs the sales tax gained via a restaurant. It’s also worth noting that the 2% sales tax on Brandon restaurants also goes into a fund which can only be spent on certain items, including the amphitheater and parks & recreation. Again, we LOVE restaurants and want 20 more to open. No matter where you eat, eat local and always, please EAT042… EAT042.com
- Property Tax – Everyone likes property tax, right? Want to know what property tax a dealer pays? A single franchise new car dealer may have 4 to 10 acres of commercial property. Multi franchise dealers can have even more acreage than that. Can you guess what they may pay in property tax? We looked this up for several dealers in our area (it’s public record). Without mentioning names, we can tell you that one new car dealer in the area paid $101,000 in property tax last year. Another one paid $184,000 in property tax. We won’t pretend to know the average property tax paid by a homeowner in Brandon or Rankin County, but using the figure of $2,500 in annual property tax, that $184k property tax dealer will have paid the same amount as a subdivision of 73 homes. So that one dealer may equal a 73-home neighborhood (based on $2,500 property tax per home).
- They’re not usually “crooks” – What’s the profession that comes to mind in a TV show or movie when they want to portray someone “crooked”? Yep, it’s commonly a car dealer or a car salesman. The phrase “used car salesman” is nearly a derogatory term. But the fact is, car dealers as a whole are typically upper scale in any community. That doesn’t mean they’re snotty or aloof, it means they own quite a bit, they risk quite a bit, and they typically contribute greatly in the community. They also sell cars. And that gives many the perception of “wheeler dealers” and “just tell me what the price is… the bottom price!”. And many think they’re crooked because they can’t just give you that “bottom price”. The truth is, believe it or not, there’s actually NO PRICE a dealer can offer you that another dealer cannot beat. That’s actually true with just about ANYTHING. When shopping for a vehicle, we hope you consider buying locally, find a dealer you like, get a fair deal, and do some business. You’ll likely want to count on the local dealer for service and parts in the future. And don’t forget, it’s the local dealer who’s doing all the things mentioned in this article locally. We could write an entire, larger article about negotiation sales, but it’s not really relevant to why dealers are important to a community. So we’ll pass on that for now. But just know, an auto manufacturer with a regular dealer network in just the past 30 or so year did promise a “same price for all” model (or “one price” model). The brand was immediately successful and had a cult following. Then they went out of business.
We’re not chastising anyone here. We’re not making any demands or any harsh complaints. We’re just explaining how important we feel car dealers are in a community. Just about ANY and EVERY business is important to a community, for that matter. But it seems like dealers are picked on. Maybe some don’t want dealers everywhere, but they don’t mind some in a particular corridor. Maybe some want dealers, but only a set amount. Either way, we respect it.
We are proud of Brandon’s car dealerships. Considering the amount of tax burden they take on in our economy, we’re glad they’re here instead of elsewhere. With the property tax and sales tax they pay, they help keep our own property taxes from being higher. If Brandon had no car dealerships, no doubt our property taxes would have to go up. Feel how you want to feel about car dealers, restaurants, retail or any other business in our community. But we hope you consider the benefits mentioned in this article of having car dealerships in our community. Thanks for reading.