How Hometown Dealerships Can Compete as National Chains Expand

By Tiger Okeley, Executive Board Member at Oak Motors

Carvana made its name in online-only used-car sales, and lately it's been buying new car stores. Over the past 18 months, the online auto giant purchased seven Chrysler Dodge Jeep Ram (CDJR) dealerships. One of those locations went from selling 30 to 50 new cars per month to more than 700Jalopnik reporting

Eye-popping sales numbers like these might cause some independently owned dealerships to wonder if Carvana is poised to devour the entire auto industry. But hometown dealerships have been competing against national competitors for years.

While scale creates a few undeniable advantages, new and used hometown dealerships still lead their larger counterparts in areas such as local knowledge, flexibility and community trust. Those can be tremendous advantages when leveraged correctly.

Owners who find themselves facing down larger competitors need to identify what business factors they can realistically own, and then build around them if they want to remain successful. Carvana Integrated the Transaction

Much of Carvana’s success came from the way it disrupted the traditional car buying process, which allowed consumers to browse a nationwide inventory and complete their transaction online. Their move into new car sales signals the company’s intent to bring this approach into other parts of the industry.

This isn’t Carvana’s first attempt at expanding its business model. In 2022, they acquired the car auction company ADESA for $2.2 billion, bringing 56 auction sites under their control while significantly expanding their inspection and reconditioning capacity. The company also partners with subsidiaries that handle supportive services such as auto loan servicing and warranty administration.

Carvana built a vertically integrated operation that creates a one-stop-shopping experience where customers can research cars, apply for financing, arrange a trade-in and take possession of a vehicle all on one platform. Their recent acquisitions support scaling those abilities nationwide. Where Hometown Dealerships Can and Can’t Compete

Plenty of hometown dealerships offer in-house financing and generous warranties. Some even offer curbside delivery. Carvana isn’t doing anything extraordinary here. But they do have a larger technology budget, sharper marketing and, sometimes, lower prices. Those are the advantages of being a publicly traded company.

It doesn’t make sense for a hometown dealership to try and beat a competitor like Carvana on those terms. But there are certain areas where national competitors can’t hope to compete. For example, hometown dealerships will always have a better understanding of their community because the owners, sales staff and maintenance teams are members of it. Hometown dealerships know their buyers and can create programs and experiences designed for local needs and sensibilities.

Hometown dealerships also aren’t constrained by the same bureaucratic processes as larger organizations. National companies often take successful small-scale models and attempt to make them work everywhere, even if they aren’t a good local fit. An independent dealer that has a history with a customer can decide to make lending decisions that wouldn’t withstand the scrutiny of a corporate model.

This local knowledge and flexibility help establish community trust that national organizations have to spend millions of dollars to develop on their own. Catchy slogans and sleek technology just can’t match a local dealership’s long, respected history in a community. Defining Your Competitive Advantages

Every dealership has the opportunity to specialize in a way that outmatches national competitors. My dealership, Oak Motors, competes against Carvana’s former parent company, DriveTime, which has a large nationwide network of dealerships serving the deep subprime market.

Our five dealerships will never match DriveTime’s national reach. But that’s not the game we decided to play. Instead, we recognize that we can outcompete larger competitors on the strength of our customer relationships. We’ve designed our sales, lending and maintenance programs to solve the problems our customers face most often. We do that better than national competitors because we understand our customers better, and they’ve come to trust us more for that.

Other hometown dealerships can run a similar playbook. Here are three areas to examine when larger competitors are putting pressure on your operation: Run the 14-Month Test in Your Own Store

Buying from a national car dealership brings many conveniences for customers. But what happens 14 days after the purchase when something goes wrong and the return window has closed, or 14 months later, when the warranty has expired? Who does the customer call when something goes wrong? Who has the authority to fix it? The answers to those questions can make or break a customer relationship. Your dealership has a real opportunity to set itself apart after the transaction has ended. Compete Where Standardization Is a Liability

When competing with a national brand or an industry disruptor, you will always lose out on ad spend, inventory selection and technology budgets. But the functions that can’t easily be standardized or scaled are the same functions national competitors won’t want to build. Single-point dealerships have the opportunity to excel in areas like creating personalized shopping experiences, investing in customer loyalty initiatives or supporting beloved community institutions. You know your market in ways a national brand can’t. Use that to your advantage. What You Measure Determines What You Build

If your scoreboard rests solely on monthly units sold, nobody in the building will be accountable for what happens after the sale. Pick a metric that exists on a longer timeline, such as repeat purchases or service retention. Those measurements will help you focus on meeting your customer’s longer-term needs and building a community of satisfied buyers. What Will You Choose to Own?

Of course, every dealership is different and none of this transfers cleanly. A franchise dealer operates under manufacturer agreements that limit what they can offer after the sale. A dealer that sells a loan to an outside lender can’t make exceptions to qualifying terms. Not every store has the capacity to run its own shop with in-house technicians. However, every dealership decides what portions of the customer experience it owns. How you follow through on those decisions is what matters most.

Oak Motors doesn't carry as much innovative clout as Carvana, but we do have the same interest in building a market that works better for the buyer. That’s also why we don’t worry when DriveTime moves in next door. They can spend all the money they want driving people there. We’ll continue focusing on owning our customer relationships. That’s something we can do better than anyone else.

Sources and related links: Oak Motors | Jalopnik reporting | $2.2 billion