Once a factory has assembled a new car, it has saddled itself with some added production costs. Still, it has managed to put one automobile at a point that is closer to the general public (the consumers). Hence, those who establish the laws of economy recognize that fact. As a result, those laws place a certain value on the newly-manufactured vehicle.
Still, that value contributes just a fraction of all the wholesale values that are assigned to new cars, trucks and SUVs. After all, consumers do not travel to the factory, in order to make a purchase. Instead the vehicle that rolls-off of the assembly line is transported to a distributor. The distributor must pay the transportation costs, before arranging for the same vehicle to be delivered to a wholesaler.
Naturally, the distributor does not offer a free service. He or she wants to be compensated for the time and expense of moving a set of wheels closer to the buying public. Moreover, distributors must pay the cost of warehousing the purchased vehicles. Those facts help to determine a car’s wholesale value. Additional factors come into play, if a vehicle’s production has taken place outside of the USA.
When cars come to the United States from a manufacturing plant that is outside of the country, each member of the supply chain gets hit with an added cost. That cost must cover the expense related to duties, excise taxes and broker fees. That is why a car from overseas typically has a higher value than one that has been made in the United States.
A wholesaler can sell a large number of cars to a retailer. Hence, the wholesaler’s price for each automobile is lower than the price charged by the retailer. Moreover, certain other costs add to the values attached to all the cars that are sold by different retailers. Those retailers have to cover the costs linked to handling, marketing, and often to financing.
Completion of each such action represents way to add to the sum total of the supply-chain costs. Each of them introduces a new expense. The sum of all the necessary actions factors-into the process of value-creation. That is why there is a difference between the wholesale and retail values of cars, regardless of their production history. That is why a car-buying consumer must pay a retailer more than a wholesaler, when both are offering the identical type of automobile.