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> Why aren't dealerships just consignment stores for cars? Presumably because people prefer getting less money now to getting more money later. Also most deale

> Why aren't dealerships just consignment stores for cars? Presumably because people prefer getting less money now to getting more money later. Also most dealerships essentially "flip" cars (like those people on HGTV flip houses) - they clean them up, do basic service, add a warranty of some sort and that gives them extra margin versus just taking a small fee for handling sale paperwork. Honestly I'd hate to sell a car via consignment because there's zero incentive for the dealer to do anything with it. They might sit on it for months.

derefr 4y ago
> Also most dealerships essentially "flip" cars (like those people on HGTV flip houses) - they clean them up, do basic service, add a warranty of some sort and that gives them extra margin versus just taking a small fee for handling sale paperwork. To be clear, I meant new car dealerships — the ones that are branded to a particular manufacturer brand (e.g. "Ford dealership", etc.) Why aren't those dealerships just consignment stores? It would stabilize a very cashflow-constrained franchise business, into something that's essentially just "making money to be a showroom" — which is exactly what those really are. > Honestly I'd hate to sell a car via consignment because there's zero incentive for the dealer to do anything with it. They might sit on it for months. Seems fine to me. Any consignment store is really just doing lead-gen: helping to arrange a contract between the buyer and the manufacturer (where they just happen to take temporary possession of the car in-between.) Sort of like a car real-estate agent. The important thing to realize about consignment models, is that your customers aren't the people coming in to buy things. Your customers are the manufacturers, who essentially rent space in your lot to show off their products. If you don't work to sell their products, the manufacturers stop renting that space from you, and you don't make money. Certainly, consignment stores aren't as motivated to move particular products. Especially particular high-margin halo products. But they are motivated to do volume — i.e. to hit their manufacturer/renters' revenue targets. (Also, keep in mind that a consignment store can't really "sit on" consignment goods; those aren't their goods to sit on. If the manufacturer wants to rotate them out for other stock, they just go to the store, take those goods out, and put something (or nothing) else in its place.)
- guyzero 4y ago
  For new car dealerships I think the reason is mostly just historical precedent but much like how movie theater owners make their money by selling popcorn and all the ticket sales go back to the studio, car dealerships make their real money through service and the car sales are often a wash.

derefr 4y ago

> Also most dealerships essentially "flip" cars (like those people on HGTV flip houses) - they clean them up, do basic service, add a warranty of some sort and that gives them extra margin versus just taking a small fee for handling sale paperwork. To be clear, I meant new car dealerships — the ones that are branded to a particular manufacturer brand (e.g. "Ford dealership", etc.) Why aren't those dealerships just consignment stores? It would stabilize a very cashflow-constrained franchise business, into something that's essentially just "making money to be a showroom" — which is exactly what those really are. > Honestly I'd hate to sell a car via consignment because there's zero incentive for the dealer to do anything with it. They might sit on it for months. Seems fine to me. Any consignment store is really just doing lead-gen: helping to arrange a contract between the buyer and the manufacturer (where they just happen to take temporary possession of the car in-between.) Sort of like a car real-estate agent. The important thing to realize about consignment models, is that your customers aren't the people coming in to buy things. Your customers are the manufacturers, who essentially rent space in your lot to show off their products. If you don't work to sell their products, the manufacturers stop renting that space from you, and you don't make money. Certainly, consignment stores aren't as motivated to move particular products. Especially particular high-margin halo products. But they are motivated to do volume — i.e. to hit their manufacturer/renters' revenue targets. (Also, keep in mind that a consignment store can't really "sit on" consignment goods; those aren't their goods to sit on. If the manufacturer wants to rotate them out for other stock, they just go to the store, take those goods out, and put something (or nothing) else in its place.)

guyzero 4y ago
For new car dealerships I think the reason is mostly just historical precedent but much like how movie theater owners make their money by selling popcorn and all the ticket sales go back to the studio, car dealerships make their real money through service and the car sales are often a wash.