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>A dealership inventory is controlled in such a way that area dealerships are forced to compete heavily with each other. In order to sell a car, you have to hav

by jasode 11y ago

>A dealership inventory is controlled in such a way that area dealerships are forced to compete heavily with each other. In order to sell a car, you have to have a car on your lot. In order to have a car on your lot, you have to order it from Honda. Maybe Toyota does it differently from Honda but this is the way the Toyota dealership manager explained it to me: all the dealerships are grouped into a "region" such as Houston+Dallas+Austin+etc. The new cars going to those 3 cities enter the USA at the gulf port of Houston (or Galveston? can't remember exactly). If I go to a Houston dealership "A" and I want a black Camry but they don't have any on the lot, the dealer can check the entire region's inventory. If Houston dealership "B" or Austin dealership "C" has them, those other dealerships are required to swap cars with dealer "A". That way, the customer isn't forced to go to another dealer just to get a particular car. The dealers' computer screens showing inventory all show every competitors' available inventory. It's possible the Toyota manager's explanation was bs or I left out some critical details. To make the Toyota story compatible with your Honda story, I suppose that for a dealer to sell a car, he still needs to have inventory. To sell 50 cars, he needs to be allocated 50 by Toyota Inc. But he's doesn't have to sell particular the 50 he happened to get. The "50" is really part of a shared pool of cars.

bane 11y ago
I just purchased a new Honda and this is basically what happened. The car I wanted wasn't at the dealer I was at, so they sent a guy 100 miles away to another part of the region to drive it back down so I could drive away with it that day. They knew from the shared inventory system that the other dealer had it. I had negotiated a pretty large discount on the car so I have no idea what sort of shenanigans the two dealers had to go through to exchange inventory.
- jasode 11y ago
  >I had negotiated a pretty large discount on the car so I have no idea what sort of shenanigans the two dealers had to go through to exchange inventory. The Toyota manager said they exchange on either MSRP-to-MSRP or dealer-cost-to-dealer-cost basis. Either way they do it, it comes out the same for them. Whatever amount of discount you were able to negotiate from a dealer would be independent from their internal swap basis.
venning 11y ago
Yes and no. Yes, we could see the inventory of every Honda dealer in the region. And yes, we could exchange cars. However, the "requirement" that cars be swapped was something that managers told customers to ease their minds while they steered them towards a car that was on our lot. The only requirement was that both dealers had to agree on which cars were being swapped. Why tell them that? Because managers are loathe to exchange cars since it often doesn't work out: - We couldn't legally bind them to buy a car we didn't have possession of yet, so we had to wait for the exchange to finish. - Customers change their minds easily and may not really want the car once they see it. Or, they may hear back from another dealer while you're exchanging and go there instead. - It takes a salesperson off the floor for hours which costs the manager money. - The other dealer gets to demand what they want of your inventory and may ask for a higher-demand vehicle in exchange. - Customers hate having "mileage" on a new car (I once had to swap a 21 mile car for a 7 mile care because a customer was so put off) and the manager knows that once they see the "mileage" they may decide otherwise. That said, a manager may authorize a transfer for rare cars. I once had to drive for an hour and half, from Virginia to Maryland, to another dealer in an S2000 to exchange based on color. Got turned around leaving the other dealer, wound up in Pennsylvania. My manager never believed that I didn't go for a joyride. EDIT: How do you create bullet lists on HN?
- gnoway 11y ago
  You can't. It's aggravating. https://news.ycombinator.com/formatdoc https://news.ycombinator.com/formatdoc
  - logfromblammo 11y ago
    - You can fake it. - Start with a blank line. - Indent each subsequent line with two spaces. - Use hyphens as your bullet. - Lines that are too long will cause horizontal scroll, so break them manually.
    - venning 11y ago
      Thank you.
twoodfin 11y ago
You can imagine why a logistics guy like Tim Cook might look at this situation and get almost as excited as Jony Ive.
TheCondor 11y ago
The article misses the issue. New cars are very nearly sold direct, the dealer doesn't arbitrarily mark up prices, in fact I think some manufacturers prevent it. There is a fixed profit for the dealer, for the most part. The manufacturers go to fairly good lengths to get the cars people want to the dealers too and then they try to have an assortment of dealer customizations that can be done, like the dealer can change the stereo out and do things like that. It's just pure brand for the dealers, why they sell new cars is just to avoid being labeled a "used car dealer." Service and used cars are the broken market, those subsidize new car sales. "Certified used cars" and such are almost always over paid for. If can be dramatic too, we tracked my wives old Subaru through from trade-in. They gave us about $2000, then the last we saw it it was still in the region (about 80 miles away in a smaller town) listed for just under $8000. It was very clean and needed a new head gasket, they may have done that, maybe not, that would have cost us about $2000 so it didn't cost them that. even if it did they were still asking 100% more and we don't know what price the eventual buyer negotiated. The laws that protect the dealers may be a problem, it looks like most states just want to protect the big "local" businesses from the big corporations though. The used car market seems like it could really benefit from disruption though.
- fluxquanta 11y ago
  I work in the used car industry and it hurts my soul. You're absolutely right that it needs disruption, specifically the "buy here-pay here" (BHPH) model. BHPH sales are when people with no/terrible credit get an overpriced used car financed by the dealership where it was purchased at 29% interest and $300 bi-weekly payments (for example). The dealers bank on the fact that these people will probably default in a couple of months. Then, the dealer repossesses the vehicle (easily with starter interrupt and GPS devices), and then it can be resold at the exact same price (and the dealer can sue for deficiency balances owed by the previous owner if they so choose). The people who have to resort to this way of car buying are already desperate, and the BHPH dealers are designed to profit off of them. The FTC and Consumer Financial Protection Bureau are slowly starting to catch on, but the lobbying by groups like the National Independent Auto Dealers Association is very strong -- they have A LOT of money, and they're always looking for ways around the law. The latest trend is changing a few words on the contract, calling it a "lease" and ripping off the consumers in just the same way.
OopsCriticality 11y ago
Toyota is also a little funny because there's the sales groups associated with Toyota Motor North America (affiliated with Toyota Motor Corp) who service most of the country, and then there's Southeast Toyota Distributors (SET) who are independent of Toyota proper. I found out about that subtle difference the hard way when I had a problem with a Toyota and expected Toyota to honor their advertisements. Turns out I bought from SET, so Toyota didn't care.

by jasode 11y ago

bane 11y ago

I just purchased a new Honda and this is basically what happened. The car I wanted wasn't at the dealer I was at, so they sent a guy 100 miles away to another part of the region to drive it back down so I could drive away with it that day. They knew from the shared inventory system that the other dealer had it. I had negotiated a pretty large discount on the car so I have no idea what sort of shenanigans the two dealers had to go through to exchange inventory.

jasode 11y ago
>I had negotiated a pretty large discount on the car so I have no idea what sort of shenanigans the two dealers had to go through to exchange inventory. The Toyota manager said they exchange on either MSRP-to-MSRP or dealer-cost-to-dealer-cost basis. Either way they do it, it comes out the same for them. Whatever amount of discount you were able to negotiate from a dealer would be independent from their internal swap basis.

venning 11y ago

Yes and no. Yes, we could see the inventory of every Honda dealer in the region. And yes, we could exchange cars. However, the "requirement" that cars be swapped was something that managers told customers to ease their minds while they steered them towards a car that was on our lot. The only requirement was that both dealers had to agree on which cars were being swapped. Why tell them that? Because managers are loathe to exchange cars since it often doesn't work out: - We couldn't legally bind them to buy a car we didn't have possession of yet, so we had to wait for the exchange to finish. - Customers change their minds easily and may not really want the car once they see it. Or, they may hear back from another dealer while you're exchanging and go there instead. - It takes a salesperson off the floor for hours which costs the manager money. - The other dealer gets to demand what they want of your inventory and may ask for a higher-demand vehicle in exchange. - Customers hate having "mileage" on a new car (I once had to swap a 21 mile car for a 7 mile care because a customer was so put off) and the manager knows that once they see the "mileage" they may decide otherwise. That said, a manager may authorize a transfer for rare cars. I once had to drive for an hour and half, from Virginia to Maryland, to another dealer in an S2000 to exchange based on color. Got turned around leaving the other dealer, wound up in Pennsylvania. My manager never believed that I didn't go for a joyride. EDIT: How do you create bullet lists on HN?

gnoway 11y ago
You can't. It's aggravating. https://news.ycombinator.com/formatdoc https://news.ycombinator.com/formatdoc
- logfromblammo 11y ago
  - You can fake it. - Start with a blank line. - Indent each subsequent line with two spaces. - Use hyphens as your bullet. - Lines that are too long will cause horizontal scroll, so break them manually.
  - venning 11y ago
    Thank you.

twoodfin 11y ago

You can imagine why a logistics guy like Tim Cook might look at this situation and get almost as excited as Jony Ive.

TheCondor 11y ago

The article misses the issue. New cars are very nearly sold direct, the dealer doesn't arbitrarily mark up prices, in fact I think some manufacturers prevent it. There is a fixed profit for the dealer, for the most part. The manufacturers go to fairly good lengths to get the cars people want to the dealers too and then they try to have an assortment of dealer customizations that can be done, like the dealer can change the stereo out and do things like that. It's just pure brand for the dealers, why they sell new cars is just to avoid being labeled a "used car dealer." Service and used cars are the broken market, those subsidize new car sales. "Certified used cars" and such are almost always over paid for. If can be dramatic too, we tracked my wives old Subaru through from trade-in. They gave us about $2000, then the last we saw it it was still in the region (about 80 miles away in a smaller town) listed for just under $8000. It was very clean and needed a new head gasket, they may have done that, maybe not, that would have cost us about $2000 so it didn't cost them that. even if it did they were still asking 100% more and we don't know what price the eventual buyer negotiated. The laws that protect the dealers may be a problem, it looks like most states just want to protect the big "local" businesses from the big corporations though. The used car market seems like it could really benefit from disruption though.

fluxquanta 11y ago
I work in the used car industry and it hurts my soul. You're absolutely right that it needs disruption, specifically the "buy here-pay here" (BHPH) model. BHPH sales are when people with no/terrible credit get an overpriced used car financed by the dealership where it was purchased at 29% interest and $300 bi-weekly payments (for example). The dealers bank on the fact that these people will probably default in a couple of months. Then, the dealer repossesses the vehicle (easily with starter interrupt and GPS devices), and then it can be resold at the exact same price (and the dealer can sue for deficiency balances owed by the previous owner if they so choose). The people who have to resort to this way of car buying are already desperate, and the BHPH dealers are designed to profit off of them. The FTC and Consumer Financial Protection Bureau are slowly starting to catch on, but the lobbying by groups like the National Independent Auto Dealers Association is very strong -- they have A LOT of money, and they're always looking for ways around the law. The latest trend is changing a few words on the contract, calling it a "lease" and ripping off the consumers in just the same way.

OopsCriticality 11y ago

Toyota is also a little funny because there's the sales groups associated with Toyota Motor North America (affiliated with Toyota Motor Corp) who service most of the country, and then there's Southeast Toyota Distributors (SET) who are independent of Toyota proper. I found out about that subtle difference the hard way when I had a problem with a Toyota and expected Toyota to honor their advertisements. Turns out I bought from SET, so Toyota didn't care.