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Ford CEO Had Enough: Dealers Raising Prices Need to Stop or Else [video]

56 points by teleforce 4y ago

OrangeMonkey 4y ago
A few months ago, I was looking to buy a new ford vehicle. Not saying the name - I am still too annoyed to advertise for them. A lot of people wanted this, so dealers in my local area were marking up and adding dealer fees WAAAAAAAY in excess of MSRP. We aren't talking 2-3k we are talking 10-20k. When I pushed back, the dealer was happy for me to walk as there was a line of people wanting it after me. My wife and I have only owned ford vehicles. Bought my first Toyota. I won't be back.
- hajdjvkrj 4y ago
  toyota is pretty well known for dealer markups as well
  - bombcar 4y ago
    At least here the dealers appear to be "selling at sticker" but I assume that if you slip the right person enough "add-ons" you find that you're higher on the list of vehicles arriving ...
- BirAdam 4y ago
  Same here, but I just decided not to buy a new vehicle. The dealership wanted 20k over NEW MSRP on a USED model.
  - raxxorraxor 4y ago
    I think dealers need to be careful since companies like Tesla demonstrate that you might be able to cut them out completely. Personally I buy used cars because I drive once a week and if you have friends with car repair skills maintenance is pretty cheap. That will soon change though and may never come back as cars will be locked down more (without actually having gained any significant functions as self driving is out of reach). Efficiency got better though. A new car today might indeed use 30% less gasoline compared to a 15 year old car. Don't know how diesel compares but that seems to be the best argument for a new car.
    - pwinnski 4y ago
      There are legal issues with cutting dealers out, it's protectionism all the way down. Tesla gets away with it (sort of) by having zero dealers anywhere. Even so, they can't currently sell cars within Texas, despite having moved their HQ here. Texas is not alone[0]. Most states require automakers to use dealerships! Tesla operates stores within Texas, but only to show off the cars. If you express interest, they direct you to the website, as they are not allowed to sell to you in person. Dealers feel pretty comfortable with their legal protections right now. They probably shouldn't, because things could change quickly, but they won't change easily. 0. https://cleantechnica.com/2019/08/03/where-tesla-can-sell-cars-map/ https://cleantechnica.com/2019/08/03/where-tesla-can-sell-ca...
      - mywittyname 4y ago
        If it gets bad enough, manufactures can spin up new brands without legacy dealership cruft. Even without that, a number of dealerships have consolidated into mega conglomerates. Manufactures could probably band together to acquire these at arms length and ensure they get the first, and largest allotment of special vehicles. But let's not pretend manufactures are innocent in all of this. For years, they tacitly encouraged shitty behavior from dealerships. They pushed margins so low that dealerships could only survive by hitting lofty sales targets and selling overpriced addons. The reason dealerships are okay with buying up new cars and selling them immediately as new is because this was the standard MO necessary for years to hit quarterly targets. If the dealership was two vehicles short of their target, and no customers were coming in, it looks like a few managers were buying some cars to trade back in next week. Customers don't blink at buying a "used" new car because dealerships just call them "demo" cars or something.
        pwinnski 4y ago
        > Manufactures could probably band together to acquire these at arms length and ensure they get the first, and largest allotment of special vehicles. To my rough recollection, that is also not allowed by law. The US government once acted to prevent single entities from controlling all pieces of a pipeline, a pattern or doctrine that got lost in the 1970s. Many laws from that era remain. And yes, for sure, I'm not saying manufacturers are blameless here! If not for the laws preventing them from owning dealerships, I'm sure they would have already done so.
  - FireBeyond 4y ago
    That may be part of a new thing. Fearful of sanctions from manufacturers, many dealerships have created shell companies, sold their supplies to the shell company for MSRP, who has immediately sold it back to the dealership for MSRP, and now sells it as a used vehicle with <100mi on it, and $20K above the new MSRP. Works doubly well for the dealership as they continue to get new cars for behaving.
- bonestamp2 4y ago
  I'm assuming it was a Bronco or a Mach-e? Both of those seem to be in high demand right now and the prices are going nuts. I have so much respect for the dealers who are NOT selling above MSRP. They could be making a lot of extra money right now and they're choosing the right thing over more profit.
  - bruceb 4y ago
    How is it the "right thing"? Its car $60k+, not food during a disaster. When there is a glut of cars are buyers going to say hey I will pay you MSRP and not the discount you are giving because you need to move the cars off the lot? Buyers have a choice not to buy a Mach-e.
  - briffle 4y ago
    I have a relative that had the exact same problem with a Kia Telluride. They had to pay way over MSRP, plus a 'fee' for beeing on the waiting list to get one.
- CobaltFire 4y ago
  Ironic as during normal times Toyota dealers are among the worst for dealer markups. Look at markup history for Tacomas and 4Runners. During the supply chain issues they've been the worst in SoCal. We wanted to buy a Sienna earlier this year and they wanted $15k over sticker and a non-refundable deposit with a 90+ day wait. This is a dealer problem, and Ford is the only traditional auto manufacturer pushing back.
  - throwaway0a5e 4y ago
    Toyota can get away with it because they're the Kitchenaid or Levis Jeans of cars. They spent time building up a very reputable brand image and now premium consumers have it in their mind that they're "good" and any action they take can then be justified post-hoc.
  - bluedino 4y ago
    We just bought a Honda because we could get it at MSRP. The Toyota waiting list had like 20 people on it, cost $1500 to get on, we'd have to buy fabric protection and ceramic coating for the dealer when we got the car...and we probably wouldn't even have gotten the car until early next year (this was in June)
- spicymaki 4y ago
  I never had a Ford, but I do like Toyotas. Sadly Toyota dealers have been marking up prices quite a bit for a while. There was a HN post recently that showed RAV 4 Primes in CA at 70k. I think this might be happening everywhere.
- sndlbn 4y ago
  Hey, so I did the same. I was asked to add 9k to the 24k MSRP car. So I said no. I chose Toyota as I got the MSRP price. I would love to return to Ford but will wait until Ford sorts out the issue.
- jokowueu 4y ago
  How does Toyota solve this issue ? Don't they sell through dealerships as well ?
  - zdragnar 4y ago
    Toyota dealership near me proudly advertised that they didn't mark up vehicles beyond MSRP. They also wouldn't have a new vehicle available for 2 months as their cars were sold that far in advance.
    - gambiting 4y ago
      >>They also wouldn't have a new vehicle available for 2 months as their cars were sold that far in advance Is that.....meant to be long? Everywhere I ask, every dealer every brand, every model, if you want a brand new vehicle from factory, the wait time is at least 6 months, usually 12+ months. If you want a brand new Kia EV6, the earliest delivery time is Q1 2024 - the order book is closed for 2023 already.
      - zdragnar 4y ago
        It's a tiny metro area (entire metro consists of roughly 3 million people) over approximately 6,000 square miles. The dealerships I spoke with get small monthly deliveries, and only the unpopular trims are available at the 2 month mark. I suspect being in an area that makes extensive use of salt on the roads in winter might not help, as new cars will depreciate that much faster- perhaps they simply aren't in as much demand as used cars. Used retail prices right now are nearly the same as MSRP if it has less than 50k miles. Of course, if you want one of the trendy models, wait time is almost certainly much longer.
  - throwaway0a5e 4y ago
    a) A combination of high MSRPs and a dearth of manufacturer rebates and sub-prime financing that ensures that the only people who come in the door are the ones who can/will pay. b) They don't. Plenty of Toyota dealers are marking things up to the moon.
- wccrawford 4y ago
  My family was really into Chevy, but the dealership here was garbage. My wife had a Mazda and their dealership was amazing, so we've had Mazdas ever since. There are some dealerships in town that would probably be bad, but I doubt any are as bad as that particular Chevy dealer. Our Mazda cars have been great, too, of course, or it wouldn't matter how good the dealer was.
- belthesar 4y ago
  I think this story is telling of the damage Ford is trying to mitigate. The choice of dealerships to take advantage of demand to raise prices for short term gain is causing long term damage to brand loyalty and awareness. I had a similar experience when Ford chose to discontinue all their sedans. I personally like an intermediate sedan for my daily driver - it's small enough to be fuel efficient and easy to drive, but large enough to hold 5 people and go touring in (not to mention fit me, a larger individual). When Ford stopped selling a sedan, I no longer became a customer interested in their products, even after having two previous Ford vehicles that I've been quite happy to own. The difference between my experience and the experience above here, however, is that the car manufacturer receives the brunt of the hate, but holds very little responsibility for the actions that hate. Dealerships have been the villain in the car buying story ever since I could remember. They were the casino, and the house always wins. When you've played the villain for so long, I believe it's only natural for you to decide to become the best villain you can be.
- gamblor956 4y ago
  The only Ford vehicles with that sort of markup were the Mustang EV and the 150 Lightning. The Mustang is a great car if you're looking to have fun, but it's not very practical. The Lightning is amazing. I've gotten to ride in my neighbor's Lightning a few times, and I would buy it in a heartbeat if it weren't sold out through the end of next year. My neighbor did not pay a dealer markup on the vehicle (in SoCal). I don't know if that's because the dealer was playing nice, or because Ford threatened to withhold Lightnings from dealers that added markups and they didn't want to lose out on future shipments.
  - bryanlarsen 4y ago
    Broncos and Mavericks are also being massively marked up, not just the electric cars.
somerandomqaguy 4y ago
Just as a look at the other side: https://www.youtube.com/watch?v=meHYBhcpdvQ https://www.youtube.com/watch?v=meHYBhcpdvQ - The Stealership Trap - Why We Need the Dealership "Rip Off" This is for motorcycles but the jist of it is that the situation with dealerships is convenient to motorcycle manufacturers. I suspect it's semi applicable to cars as well.
- Someone1234 4y ago
  If you watch the video, it is largely about manufacturer inefficiencies and abuse, and it ends essentially saying that the current system needs reform. I'd put this into the "current model needs to change" category rather than in defense of it, regardless of what the title of the video may otherwise suggest.
- LilBytes 4y ago
  Thought I'd expect to see that here, FortNine has excellent content, and this video is one of his best.
yardie 4y ago
There is a website, https://markups.org/ https://markups.org/, dedicated to listing which dealers are marking up and which are not as reported by users. So far, south Florida is a basket case and almost every dealer is charging huge markups. https://markups.org/ https://markups.org/
- TreyGuy 4y ago
  Thanks for the plug! Markups.org founder here, recent YC member and startup noob. I created this crowd sourced site with my sister and we are actually thinking about applying to YC.
  - dang 4y ago
    I think you should apply to YC! you're clearly striking a nerve, so you're making something people want, which is already better than the median application.
  - yardie 4y ago
    This site is great and I'm so glad I found it. Car shopping has been challenging and this is an invaluable service you've created.
msoad 4y ago
It might sound crazy but I bought a Tesla mainly not to go through the dealership hell. I hate hat hate the whole thing so much!
- FireBeyond 4y ago
  Tesla just moved hell to the Service Center.
  - beej71 4y ago
    Seriously. I've seen enough of RichRebuilds to make me steer clear.
ParksNet 4y ago
Why don't manufacturers just increase prices temporarily to neutralize supply and demand?
- joezydeco 4y ago
  Because if you raise the price of your pickup $20,000 and Toyota doesn't then you're discouraging customers who see two similar vehicles with a significant difference in advertised price. And if you try to work with the other companies to move prices up together, that's illegal. Same for airline tickets.
- kube-system 4y ago
  Look at the sentiment on these types of articles. Do you think Toyota wants that sentiment directed towards themselves? Supply issues might last for a couple years; brand image lasts for decades.
- colinmhayes 4y ago
  Car companies have spent a literal century building their brand. It’s important to them.
- taftster 4y ago
  And then have to deal with all the "price gouging" press/lawsuites/legislation. The manufacturers know they need to keep selling at a constant price, otherwise it will be much much worse for their business and brand. Ford's CEO trying to address this dealership franchise problem is going to bode well for the Ford brand overall. They are best to keep their prices down for now and make the dealers look like the bad guys everyone knows they are.
widowlark 4y ago
When I bought my car (ford focus st), I had a company discount in my back pocket. so we went through the whole negotiation phase with the dealer and I got it down to a price I could swallow and right before I signed I pulled out my company discount slip and the salesman who was working with me was super upset, but honored the discount on top of our negotiated rate. 1. fuck dealerships and 2. dont use your morals with salesmen.
- mathattack 4y ago
  Car salespeople are almost as sleazy as ERP and database salespeople. :-) The company discount is why dealers around Detroit are amongst the richest in their communities.
  - pchristensen 4y ago
    For the majority of very small towns in America, the richest family is probably the one that owns car dealership(s). They have a geographic monopoly so they haven't had to compete in the rollup of retail, banking, etc.
    - colechristensen 4y ago
      What? If you live in the very small towns of America you drive 30 minutes to 2 hours away to the dealerships in bigger towns which are usually owned by people far away.
      - nathanvanfleet 4y ago
        That guys rich too
  - mertd 4y ago
    Dealers are richest in their communities everywhere due to the anticompetitive franchising laws. https://www.nytimes.com/2022/05/14/opinion/sunday/rich-happiness-big-data.html https://www.nytimes.com/2022/05/14/opinion/sunday/rich-happi...
MomoXenosaga 4y ago
Ford can start selling their cars online if they think they can do better. Problem solved. Of course the reason why they don't already do this is because they have done the math and concluded that dealerships actually earn them money. Dealerships aren't quaking in their boots. Is he insinuating that dealers are all illegally conspiring by the way? There must be at least a dozen Ford dealers in a 100 kilometre radius of your house they aren't rare. Find the cheapest one.
- clintonb 4y ago
  Some states prevent manufacturers from selling directly to consumers.
- t3rabytes 4y ago
  Dealer franchise agreements with the manufacturer also frequently include provisions that prevent the manufacturers from selling direct to consumer IIRC.
- Calloggs 4y ago
  Most U.S. states have laws that only allow car sales to happen though dealers. Online car sales, even from manufacturers, just let you shop the inventory of dealerships. The purchase still goes through a dealership. https://www.kbb.com/car-news/the-future-of-car-shopping-fewer-dealerships-national-chains/ https://www.kbb.com/car-news/the-future-of-car-shopping-fewe...
Someone1234 4y ago
I wish they'd just get rid of dealerships already. For most households buying a vehicle is their second largest purchase. It is meant to be enjoyable/fun. But dealerships have managed to make it very unfun/stressful/bad. And there's always "but what if you find the unicorn dealership?!" but frankly those are few and far between. If you talk to random people in the street 9/10 will have a negative dealership story. Dealerships do nothing to control price increases, and suggesting they do misunderstands the market forces. What controls prices is competition (i.e. other vehicles, from other manufacturers). All dealerships do is rent-seek in the middle. I'd like to know that if my next door neighbor and I buy the same vehicle, that we paid the same price, and had the same experience. Just open up "show rooms" that don't sell vehicles, then a website where you can order for home delivery for a fixed price. The whole "local jobs" argument would have more merit if dealerships weren't a toxic influence on local politics, and nobody is suggesting that manufacturers won't need to continue to offer local repair facilities for recalls and of course to staff these showrooms.
- rasz 4y ago
  but who will sell me my trucoat? https://www.youtube.com/watch?v=B2LLB9CGfLs https://www.youtube.com/watch?v=B2LLB9CGfLs
- bluedino 4y ago
  It sucks not being able to go down to a lot and pick out a new car.
  - Someone1234 4y ago
    It sucks going down to a lot to test drive a new car and being hassled by someone who often knows less about the vehicle than you, then your phone blowing up for weeks after. I'd prefer to go to a showroom, test drive, not be hassled because there's no commission on the line. Then go do that at several other manufacture's showrooms, then go home and make my final selection in peace with a web browser and my spouse. If this system becomes efficient there's no reason why the manufacturer cannot have an interstate warehouse Amazon style with some "next day delivery" vehicles. So you can either pick your bespoke configuration and wait [period] or get something in inventory for almost immediate delivery, but in both cases you're ordering via your browser/phone. Now instead of shopping each state dealership's inventory one by one, you're shopping all collective dealership's inventory together and getting an incredible buying experience.
Flatcircle 4y ago
Went into a dealership to look at a 30k ford bronco, dealer came back with a 60k price tag, said it was due to dealership mark ups. The worst. A dying industry taking its last breaths.
maxcan 4y ago
One of the best parts of owning a tesla.
thedougd 4y ago
I've heard through the grapevine that car buying services (via Costco, credit union, etc) can get you to MSRP, if not better, for some in demand models.
- nineplay 4y ago
  I had a bad experience with a similar service. It led me to a dealership which claimed to have the car I wanted at a < MSRP price. I called the dealership ahead of time and they confirmed they had that car at that price. I got there and oops they forgot to mention that the car had a extra options package that increased the price by $$ also the car, in our opinion, had a manufacture defect which they said was normal. Finally they gave an offer on my trade-in that was about half the bluebook value. Almost on a whim we we stopped at another dealership on our way home and got the same car, sans defect, at a lower price with a higher trade in. I think the dealerships that participate in these services rely on customer trust. The customer wants to believe they are getting the best price and the customer doesn't want to comparison shop, they just want to buy a car and go home. The participating dealership is taking advantage of that. We stumbled upon a effective car-buying technique - come in the dealership late afternoon and tell them, truthfully, that you've got to get home before the baby-sitter leaves in about 45 minutes. We were just planning to test drive but they were motivated. "We want car for X", "You can have it for Y" "We don't have time to bargain we've got to get home" "OK, you have have it for X" We got the car we wanted, the trade-in value we wanted, we brushed aside all discussions of extra features. Gotta go, take it or leave it. We made it home in time and she did really have to leave. We're not good actors, I think we could only get away with it because we were 100% sincere
- bluedino 4y ago
  In the old days, when Ford manufactured cars in the USA, employees got a discount called the X-plan. If your parents, grandparents, brother, whatever, worked for Ford, you could use the X plan. You could also combine this with whatever other offers Ford was running at the time. You'd often get $8-10,000 off a vehicle, and even more off if you bought a full-size truck.
  - 4y ago
joezydeco 4y ago
In a lot of industries the dealership/distributor model smooths out cashflow and inventory. You build a bunch of something, the distributors buy it from you off the dock (or, sometimes, they even pay in advance) and then the distributor sits on the inventory while it sells. It's off of the manufacturer's books and there is cash in hand to buy more supplies. Ford's switchover makes sense if their factories are running 100% flat-out and every car has a waiting customer. Or if it's all made-to-order and the queue is full. What happens if demand drops off? Is Ford going to stack up cars in Dearborn or will they just randomly shut down plants to take up slack? Will you need to prepay for a car so they have the money to make it?
- mertd 4y ago
  As I understand, walking into a dealer and driving out with a car an hour later is an American thing. In many other countries, cars are made to order.
  - throwayyy479087 4y ago
    This is also why euro-spec Mercedes have so many more engine options compared to Americans. in the US 3 engines is a lot for a model, but some German VWs have like 7 choices. You pick the exact one for your needs.
  - unethical_ban 4y ago
    Wild. How am I supposed to impulse buy a new Bronco that I don't need if they aren't in stock at the dealer waiting for a signature? No, really. If Land Rover Discovery 2dr were in stock at MSRP there's a high chance I'd have been silly enough to buy it.
BitwiseFool 4y ago
This might be a non-sequitur, but does anyone know why so many car dealerships are named after individuals? I assume it's a marketing gimmick and the answer might be as simple as that.
- CalRobert 4y ago
  I always thought it was the person who started the dealership....
- kube-system 4y ago
  It seems to be a thing with lot of franchisees. I guess if they were creative they could come up with their own business ideas :)
post_break 4y ago
Ford dealer wouldn't let me test drive a Fiesta ST. A fiesta... When the Focus RS dropped the dealers tacked on so much bullshit ADM it sank that car. Every new cool mustang? Forget about it. The Bronco? Get the lube out. Raptor? lol you better know the dealer's owner to get close to MSRP. It's a joke out there. Even my Honda Accord I bought last year, I had to call around and see which dealers weren't doing markups, on Accords... The one dealer had a 20k ADM on the two Civic Type Rs they had in the show room. Dealers used to be annoying, now they are straight up highway robbery.
- PenguinCoder 4y ago
  "It's because of inflation" - that these companies continue to increase through the roof by engaging in corporate greed.
  - namlem 4y ago
    In this case it's small business greed, not corporate greed.
- mywittyname 4y ago
  Ironically, the FoRS sat on lots for ages after the first batch left show rooms. You could find them new well into 2019 (a model year after production stopped, or about 1.5 calendar years). The current car market is making me regret no picking up another cool car in the late 10s. So many great options were on the market for well under MSRP: GT350s, base C7s, 1LE camaros, pre-refresh ND Miatas. Those same cars are probably selling for well over purchase price now, with 50k miles on them.
- dr_kretyn 4y ago
  What is ADM?
  - detaro 4y ago
    "Additional Dealer Markup"
upupandup 4y ago
just as the used car market is imploding he times this response to look like he's doing stuff. the bubble of everything is bursting and we are gonna hear more leaders waving their hand like they are in control (they are not).
czstar 4y ago
There’s a lot of justifiable hate against dealerships but I think the hate against them for markups is not justified. Clearly there are people willing to pay above MSRP. If the dealerships don’t markup the vehicles then scalpers will buy at MSRP and resell the vehicles at a markup. As bad as the dealership experience is there is less chance for fraud or theft at a dealership than from a scalper. In a lot of places there are two scenarios in the local car market. One dealership will sell at MSRP but you’ll have to wait 4 to 6 months. Another has inventory but at a significant markup. You can buy now and pay more or wait a while and pay less. Choose the option that fits your situation. Of course, the best option would be to properly fund public transportation.
- AlphaSite 4y ago
  I don’t know if car scalping is a major thing, the risk reward doesn’t really work out IMO and arguably the dealership is the one doing the scalping…
  - czstar 4y ago
    Car scalping is a thing and it would be a much bigger thing without dealership markups. The markups at the dealership means a smaller market for scalpers. In the absence of dealership markups there would be more scalpers. https://www.motorauthority.com/news/1136687_gm-threatens-dealers-would-be-flippers-with-non-transferrable-warranties https://www.motorauthority.com/news/1136687_gm-threatens-dea...
    - cptskippy 4y ago
      Markups are just scalping with fewer steps.
      - czstar 4y ago
        That is precisely the point I was making. The dealership becomes the scalper. Would you rather pay the scalp price at a dealership with the accompanying regulations and laws surrounding that transaction or pay the scalp price from someone you don’t know with much fewer regulations accompanying that transaction? The scalp market exists. I think it’s better to have that market at a dealership than from people you might not be able to track down in the case something goes wrong.
trixie_ 4y ago
This is another one of Tesla’s innovations/disruptions that is clearly better and the rest of the industry is too stubborn to change even if it’s better for the consumer. No likes being hassled and pressured by a dealer. Does any other car company let you order a car online for a flat price with minimal overhead and have it delivered right to your door? Tesla has fought every other car company state by state with little support to be able to give the consumer a significantly better buying experience. I’m sure if you asked the CEO of Ford today he still wouldn’t support Tesla’s business model. You can’t play both sides.
- colinmhayes 4y ago
  It’s not stubbornness. It’s literally illegal in 48 states to sell direct if there’s ever been a dealership for their brand in the state. As the video goes over ford os trying really hard to dump dealers, it’s not easy.
  - trixie_ 4y ago
    Stubbornness in supporting the direct to consumer business model. Talk is cheap, and other car companies can’t even do that, though this Ford CEO here is starting to crack.
    - colinmhayes 4y ago
      What do you want the cord ceo to do? Selling his cars directly is illegal, it’s just not an option at this point. He instituted a rule that says that the in demand cars have to be sold to the person that ordered them but dealerships essentially told him to fuck off. Now what?
      - trixie_ 4y ago
        Now it’s time to work on changing the laws. Tesla has been going at it alone.
        4y ago
dopeboy 4y ago
If I'm selling a product, I can either take on distribution on my own (no dealerships, self-serve) or partner with resellers (dealerships). With the former, I control the entire sales UX and receive a higher price. If we're talking physical goods, I do have to spend more effort getting my product out there for people to inspect, try, etc. With the latter, I'm outsourcing sales to someone else. They have to procure the land, build the showroom, etc. I as the product maker just need to dump my products on them. That person receives a cut of the sale. Assuming I have my understanding above right, I see the following factors challenging the dealership/reseller model: * The product doesn't need to be physically inspected anymore. Much like the purchasing behavior around an iPhone, if the customer can easily grok what's going on a webpage _and_ easily return it, they are more open taking a leap of faith sight unseen or "less seen". At this point, the reseller model brings friction into the process. * The product is so in demand that the reseller accumulates leverage and starts to upcharge which OP's video is related. The product maker has no control over these premiums. In a high volume low margin business with added pressure to eke out anything, the product maker begins to wonder. * Due to high real estate costs, the reseller underserves certain geographies.
- yodon 4y ago
  The car dealership landscape is legally protected. Car dealers used their local political connections to enact state-wide laws in all states preventing car manufacturers from owning or opening dealerships. That's why Tesla's showrooms are the way they are - Tesla's showrooms are carefully constructed to not get classified as Dealerships under these laws.
- namlem 4y ago
  Unless your product is cars, in which case you are legally obligated to use the dealership model because most states have passed laws mandating it.
dbetteridge 4y ago
I've had reasonable experiences with the Subaru dealerships Currently have a 2022 Outback on order and final price including drive-away costs in Australia came in at ~3000$ AUD below the online build price. That was including some accessories and delivery costs to a different state from the dealership where I ordered it...
throwayyy479087 4y ago
The Focus ST and RS should have been sales monsters but ADM from dealerships ruined those products. Really quite sad - America hasn't had a good, popular UDM hot hatch in a long time.
bryanlarsen 4y ago
This might be rational behaviour on the part of the dealerships. They're burning their bridges to Ford and their customers, but if your business is going to die anyways you might as profit while it burns. What's going to really kill dealerships is that EV's need so much less maintenance than ICE car's and most of that maintenance is tires and wipers which is highly competitive. Service is where dealerships make the bulk of their money.
Ekaros 4y ago
So free market is working as there is less supply than demand and people are complaining about it for some reason? So there was no issues when you could get car below MSRP?
- czstar 4y ago
  People commenting on this don’t seem to understand market dynamics. The price people are willing to pay for some vehicles is much greater than the MSRP. Someone along the chain is going to sell those vehicles at the greater price. It’s either the manufacturer in the case of Tesla (they’ve massively raised their prices), or the dealership, or third party scalpers.
dano 4y ago
Purchasing and picking up a Tesla was the best car buying experience of my life. I certainly recommend their sales model.
FloatArtifact 4y ago
I wonder how the absence of dealerships affects the right to repair? This becomes especially important with EVs as companies say they are too complex to be serviced by an individual or even in some cases by a anyone that's not an authorized party/dealership.
TreyGuy 4y ago
we are tracking these dealer markups and addons at https://markups.org https://markups.org https://www.themanual.com/auto/markup-exposes-car-dealership-greed/ https://www.themanual.com/auto/markup-exposes-car-dealership...
alkonaut 4y ago
Which countries still have dealerships of the US kind for new cars? I.e the type that keep a stock of new cars with fixed options, or that are allowed to set prices on new cars that don’t match the ones you get quoted from the manufacturer? In Europe the dealerships, while often operates independently or with only partial ownership from the brand, seem to be mostly showrooms with no large lot of new cars but a small selection of cars only for show/test. The purchase is for a custom built car received through the dealer several months later. In my experience a pleasant way of buying a new car. Usually you visit the dealer having configured a car using the manufacturers online tool which gives you the exact quote. At the dealer you might be recommended to swap some option but usually you just talk it through with the salesperson and place the order. With some luck you might be able to score a bit of a rebate or extras e.g if you use their brand financing or insurance, but for the most part they just help you order the car you configure online for the price you saw online. Where they do fleece you though is “brand service”.
ppetty 4y ago
So I just went to Ford.com and like almost all manufacturer’s sites, I can’t build & price without entering a zip code and immediately after doing so base prices jump for fees including delivery without any options selected. No pricing for me to go to the car is available and prices seem to increase no matter what zip code I enter. The base price seems off no matter how you want to buy. So then if I inquire about a vehicle on lot at local dealers prices are all over the place. But if I look at a 1 year old used vehicle, prices seem to normalize and become much more consistent. Using Carvana & CarMax, the price of a Bronco Sport seems to be free and clear of arbitrary markup. So what is the allure of new? And of buying used from a dealership? They both seem like really bad choices. But maybe there’s some real benefit to new I’m missing? I’m seriously in the market & see a video like this and feel that it reinforces my opinion that I’m better off with a used vehicle for the sake of depreciation I’m avoiding and the nightmare of doing business with price gougers.
beej71 4y ago
I bought a Saturn in 1999, and part of the reason was they published the price and didn't negotiate. It still runs, incidentally. :)
solarkraft 4y ago
Does the US have nothing like CarWow? Their thing is (as far as I understand it) to pit dealers against each other to get a fair price and basically abstract them away as much as possible.

56 points by teleforce 4y ago

A few months ago, I was looking to buy a new ford vehicle. Not saying the name - I am still too annoyed to advertise for them. A lot of people wanted this, so dealers in my local area were marking up and adding dealer fees WAAAAAAAY in excess of MSRP. We aren't talking 2-3k we are talking 10-20k. When I pushed back, the dealer was happy for me to walk as there was a line of people wanting it after me. My wife and I have only owned ford vehicles. Bought my first Toyota. I won't be back.

hajdjvkrj 4y ago
toyota is pretty well known for dealer markups as well
- bombcar 4y ago
  At least here the dealers appear to be "selling at sticker" but I assume that if you slip the right person enough "add-ons" you find that you're higher on the list of vehicles arriving ...
BirAdam 4y ago
Same here, but I just decided not to buy a new vehicle. The dealership wanted 20k over NEW MSRP on a USED model.
- raxxorraxor 4y ago
  I think dealers need to be careful since companies like Tesla demonstrate that you might be able to cut them out completely. Personally I buy used cars because I drive once a week and if you have friends with car repair skills maintenance is pretty cheap. That will soon change though and may never come back as cars will be locked down more (without actually having gained any significant functions as self driving is out of reach). Efficiency got better though. A new car today might indeed use 30% less gasoline compared to a 15 year old car. Don't know how diesel compares but that seems to be the best argument for a new car.
  - pwinnski 4y ago
    There are legal issues with cutting dealers out, it's protectionism all the way down. Tesla gets away with it (sort of) by having zero dealers anywhere. Even so, they can't currently sell cars within Texas, despite having moved their HQ here. Texas is not alone[0]. Most states require automakers to use dealerships! Tesla operates stores within Texas, but only to show off the cars. If you express interest, they direct you to the website, as they are not allowed to sell to you in person. Dealers feel pretty comfortable with their legal protections right now. They probably shouldn't, because things could change quickly, but they won't change easily. 0. https://cleantechnica.com/2019/08/03/where-tesla-can-sell-cars-map/ https://cleantechnica.com/2019/08/03/where-tesla-can-sell-ca...
    - mywittyname 4y ago
      If it gets bad enough, manufactures can spin up new brands without legacy dealership cruft. Even without that, a number of dealerships have consolidated into mega conglomerates. Manufactures could probably band together to acquire these at arms length and ensure they get the first, and largest allotment of special vehicles. But let's not pretend manufactures are innocent in all of this. For years, they tacitly encouraged shitty behavior from dealerships. They pushed margins so low that dealerships could only survive by hitting lofty sales targets and selling overpriced addons. The reason dealerships are okay with buying up new cars and selling them immediately as new is because this was the standard MO necessary for years to hit quarterly targets. If the dealership was two vehicles short of their target, and no customers were coming in, it looks like a few managers were buying some cars to trade back in next week. Customers don't blink at buying a "used" new car because dealerships just call them "demo" cars or something.
      - pwinnski 4y ago
        > Manufactures could probably band together to acquire these at arms length and ensure they get the first, and largest allotment of special vehicles. To my rough recollection, that is also not allowed by law. The US government once acted to prevent single entities from controlling all pieces of a pipeline, a pattern or doctrine that got lost in the 1970s. Many laws from that era remain. And yes, for sure, I'm not saying manufacturers are blameless here! If not for the laws preventing them from owning dealerships, I'm sure they would have already done so.
- FireBeyond 4y ago
  That may be part of a new thing. Fearful of sanctions from manufacturers, many dealerships have created shell companies, sold their supplies to the shell company for MSRP, who has immediately sold it back to the dealership for MSRP, and now sells it as a used vehicle with <100mi on it, and $20K above the new MSRP. Works doubly well for the dealership as they continue to get new cars for behaving.
bonestamp2 4y ago
I'm assuming it was a Bronco or a Mach-e? Both of those seem to be in high demand right now and the prices are going nuts. I have so much respect for the dealers who are NOT selling above MSRP. They could be making a lot of extra money right now and they're choosing the right thing over more profit.
- bruceb 4y ago
  How is it the "right thing"? Its car $60k+, not food during a disaster. When there is a glut of cars are buyers going to say hey I will pay you MSRP and not the discount you are giving because you need to move the cars off the lot? Buyers have a choice not to buy a Mach-e.
- briffle 4y ago
  I have a relative that had the exact same problem with a Kia Telluride. They had to pay way over MSRP, plus a 'fee' for beeing on the waiting list to get one.
CobaltFire 4y ago
Ironic as during normal times Toyota dealers are among the worst for dealer markups. Look at markup history for Tacomas and 4Runners. During the supply chain issues they've been the worst in SoCal. We wanted to buy a Sienna earlier this year and they wanted $15k over sticker and a non-refundable deposit with a 90+ day wait. This is a dealer problem, and Ford is the only traditional auto manufacturer pushing back.
- throwaway0a5e 4y ago
  Toyota can get away with it because they're the Kitchenaid or Levis Jeans of cars. They spent time building up a very reputable brand image and now premium consumers have it in their mind that they're "good" and any action they take can then be justified post-hoc.
- bluedino 4y ago
  We just bought a Honda because we could get it at MSRP. The Toyota waiting list had like 20 people on it, cost $1500 to get on, we'd have to buy fabric protection and ceramic coating for the dealer when we got the car...and we probably wouldn't even have gotten the car until early next year (this was in June)
spicymaki 4y ago
I never had a Ford, but I do like Toyotas. Sadly Toyota dealers have been marking up prices quite a bit for a while. There was a HN post recently that showed RAV 4 Primes in CA at 70k. I think this might be happening everywhere.
sndlbn 4y ago
Hey, so I did the same. I was asked to add 9k to the 24k MSRP car. So I said no. I chose Toyota as I got the MSRP price. I would love to return to Ford but will wait until Ford sorts out the issue.
jokowueu 4y ago
How does Toyota solve this issue ? Don't they sell through dealerships as well ?
- zdragnar 4y ago
  Toyota dealership near me proudly advertised that they didn't mark up vehicles beyond MSRP. They also wouldn't have a new vehicle available for 2 months as their cars were sold that far in advance.
  - gambiting 4y ago
    >>They also wouldn't have a new vehicle available for 2 months as their cars were sold that far in advance Is that.....meant to be long? Everywhere I ask, every dealer every brand, every model, if you want a brand new vehicle from factory, the wait time is at least 6 months, usually 12+ months. If you want a brand new Kia EV6, the earliest delivery time is Q1 2024 - the order book is closed for 2023 already.
    - zdragnar 4y ago
      It's a tiny metro area (entire metro consists of roughly 3 million people) over approximately 6,000 square miles. The dealerships I spoke with get small monthly deliveries, and only the unpopular trims are available at the 2 month mark. I suspect being in an area that makes extensive use of salt on the roads in winter might not help, as new cars will depreciate that much faster- perhaps they simply aren't in as much demand as used cars. Used retail prices right now are nearly the same as MSRP if it has less than 50k miles. Of course, if you want one of the trendy models, wait time is almost certainly much longer.
- throwaway0a5e 4y ago
  a) A combination of high MSRPs and a dearth of manufacturer rebates and sub-prime financing that ensures that the only people who come in the door are the ones who can/will pay. b) They don't. Plenty of Toyota dealers are marking things up to the moon.
wccrawford 4y ago
My family was really into Chevy, but the dealership here was garbage. My wife had a Mazda and their dealership was amazing, so we've had Mazdas ever since. There are some dealerships in town that would probably be bad, but I doubt any are as bad as that particular Chevy dealer. Our Mazda cars have been great, too, of course, or it wouldn't matter how good the dealer was.
belthesar 4y ago
I think this story is telling of the damage Ford is trying to mitigate. The choice of dealerships to take advantage of demand to raise prices for short term gain is causing long term damage to brand loyalty and awareness. I had a similar experience when Ford chose to discontinue all their sedans. I personally like an intermediate sedan for my daily driver - it's small enough to be fuel efficient and easy to drive, but large enough to hold 5 people and go touring in (not to mention fit me, a larger individual). When Ford stopped selling a sedan, I no longer became a customer interested in their products, even after having two previous Ford vehicles that I've been quite happy to own. The difference between my experience and the experience above here, however, is that the car manufacturer receives the brunt of the hate, but holds very little responsibility for the actions that hate. Dealerships have been the villain in the car buying story ever since I could remember. They were the casino, and the house always wins. When you've played the villain for so long, I believe it's only natural for you to decide to become the best villain you can be.
gamblor956 4y ago
The only Ford vehicles with that sort of markup were the Mustang EV and the 150 Lightning. The Mustang is a great car if you're looking to have fun, but it's not very practical. The Lightning is amazing. I've gotten to ride in my neighbor's Lightning a few times, and I would buy it in a heartbeat if it weren't sold out through the end of next year. My neighbor did not pay a dealer markup on the vehicle (in SoCal). I don't know if that's because the dealer was playing nice, or because Ford threatened to withhold Lightnings from dealers that added markups and they didn't want to lose out on future shipments.
- bryanlarsen 4y ago
  Broncos and Mavericks are also being massively marked up, not just the electric cars.

somerandomqaguy 4y ago

Just as a look at the other side: https://www.youtube.com/watch?v=meHYBhcpdvQ https://www.youtube.com/watch?v=meHYBhcpdvQ - The Stealership Trap - Why We Need the Dealership "Rip Off" This is for motorcycles but the jist of it is that the situation with dealerships is convenient to motorcycle manufacturers. I suspect it's semi applicable to cars as well.

Someone1234 4y ago
If you watch the video, it is largely about manufacturer inefficiencies and abuse, and it ends essentially saying that the current system needs reform. I'd put this into the "current model needs to change" category rather than in defense of it, regardless of what the title of the video may otherwise suggest.
LilBytes 4y ago
Thought I'd expect to see that here, FortNine has excellent content, and this video is one of his best.

yardie 4y ago

There is a website, https://markups.org/ https://markups.org/, dedicated to listing which dealers are marking up and which are not as reported by users. So far, south Florida is a basket case and almost every dealer is charging huge markups. https://markups.org/ https://markups.org/

TreyGuy 4y ago
Thanks for the plug! Markups.org founder here, recent YC member and startup noob. I created this crowd sourced site with my sister and we are actually thinking about applying to YC.
- dang 4y ago
  I think you should apply to YC! you're clearly striking a nerve, so you're making something people want, which is already better than the median application.
- yardie 4y ago
  This site is great and I'm so glad I found it. Car shopping has been challenging and this is an invaluable service you've created.

msoad 4y ago

It might sound crazy but I bought a Tesla mainly not to go through the dealership hell. I hate hat hate the whole thing so much!

FireBeyond 4y ago
Tesla just moved hell to the Service Center.
- beej71 4y ago
  Seriously. I've seen enough of RichRebuilds to make me steer clear.

ParksNet 4y ago

Why don't manufacturers just increase prices temporarily to neutralize supply and demand?

joezydeco 4y ago
Because if you raise the price of your pickup $20,000 and Toyota doesn't then you're discouraging customers who see two similar vehicles with a significant difference in advertised price. And if you try to work with the other companies to move prices up together, that's illegal. Same for airline tickets.
kube-system 4y ago
Look at the sentiment on these types of articles. Do you think Toyota wants that sentiment directed towards themselves? Supply issues might last for a couple years; brand image lasts for decades.
colinmhayes 4y ago
Car companies have spent a literal century building their brand. It’s important to them.
taftster 4y ago
And then have to deal with all the "price gouging" press/lawsuites/legislation. The manufacturers know they need to keep selling at a constant price, otherwise it will be much much worse for their business and brand. Ford's CEO trying to address this dealership franchise problem is going to bode well for the Ford brand overall. They are best to keep their prices down for now and make the dealers look like the bad guys everyone knows they are.

widowlark 4y ago

When I bought my car (ford focus st), I had a company discount in my back pocket. so we went through the whole negotiation phase with the dealer and I got it down to a price I could swallow and right before I signed I pulled out my company discount slip and the salesman who was working with me was super upset, but honored the discount on top of our negotiated rate. 1. fuck dealerships and 2. dont use your morals with salesmen.

mathattack 4y ago
Car salespeople are almost as sleazy as ERP and database salespeople. :-) The company discount is why dealers around Detroit are amongst the richest in their communities.
- pchristensen 4y ago
  For the majority of very small towns in America, the richest family is probably the one that owns car dealership(s). They have a geographic monopoly so they haven't had to compete in the rollup of retail, banking, etc.
  - colechristensen 4y ago
    What? If you live in the very small towns of America you drive 30 minutes to 2 hours away to the dealerships in bigger towns which are usually owned by people far away.
    - nathanvanfleet 4y ago
      That guys rich too
- mertd 4y ago
  Dealers are richest in their communities everywhere due to the anticompetitive franchising laws. https://www.nytimes.com/2022/05/14/opinion/sunday/rich-happiness-big-data.html https://www.nytimes.com/2022/05/14/opinion/sunday/rich-happi...

MomoXenosaga 4y ago

Ford can start selling their cars online if they think they can do better. Problem solved. Of course the reason why they don't already do this is because they have done the math and concluded that dealerships actually earn them money. Dealerships aren't quaking in their boots. Is he insinuating that dealers are all illegally conspiring by the way? There must be at least a dozen Ford dealers in a 100 kilometre radius of your house they aren't rare. Find the cheapest one.

clintonb 4y ago
Some states prevent manufacturers from selling directly to consumers.
t3rabytes 4y ago
Dealer franchise agreements with the manufacturer also frequently include provisions that prevent the manufacturers from selling direct to consumer IIRC.
Calloggs 4y ago
Most U.S. states have laws that only allow car sales to happen though dealers. Online car sales, even from manufacturers, just let you shop the inventory of dealerships. The purchase still goes through a dealership. https://www.kbb.com/car-news/the-future-of-car-shopping-fewer-dealerships-national-chains/ https://www.kbb.com/car-news/the-future-of-car-shopping-fewe...

Someone1234 4y ago

I wish they'd just get rid of dealerships already. For most households buying a vehicle is their second largest purchase. It is meant to be enjoyable/fun. But dealerships have managed to make it very unfun/stressful/bad. And there's always "but what if you find the unicorn dealership?!" but frankly those are few and far between. If you talk to random people in the street 9/10 will have a negative dealership story. Dealerships do nothing to control price increases, and suggesting they do misunderstands the market forces. What controls prices is competition (i.e. other vehicles, from other manufacturers). All dealerships do is rent-seek in the middle. I'd like to know that if my next door neighbor and I buy the same vehicle, that we paid the same price, and had the same experience. Just open up "show rooms" that don't sell vehicles, then a website where you can order for home delivery for a fixed price. The whole "local jobs" argument would have more merit if dealerships weren't a toxic influence on local politics, and nobody is suggesting that manufacturers won't need to continue to offer local repair facilities for recalls and of course to staff these showrooms.

rasz 4y ago
but who will sell me my trucoat? https://www.youtube.com/watch?v=B2LLB9CGfLs https://www.youtube.com/watch?v=B2LLB9CGfLs
bluedino 4y ago
It sucks not being able to go down to a lot and pick out a new car.
- Someone1234 4y ago
  It sucks going down to a lot to test drive a new car and being hassled by someone who often knows less about the vehicle than you, then your phone blowing up for weeks after. I'd prefer to go to a showroom, test drive, not be hassled because there's no commission on the line. Then go do that at several other manufacture's showrooms, then go home and make my final selection in peace with a web browser and my spouse. If this system becomes efficient there's no reason why the manufacturer cannot have an interstate warehouse Amazon style with some "next day delivery" vehicles. So you can either pick your bespoke configuration and wait [period] or get something in inventory for almost immediate delivery, but in both cases you're ordering via your browser/phone. Now instead of shopping each state dealership's inventory one by one, you're shopping all collective dealership's inventory together and getting an incredible buying experience.

Flatcircle 4y ago

Went into a dealership to look at a 30k ford bronco, dealer came back with a 60k price tag, said it was due to dealership mark ups. The worst. A dying industry taking its last breaths.

maxcan 4y ago

One of the best parts of owning a tesla.

thedougd 4y ago

I've heard through the grapevine that car buying services (via Costco, credit union, etc) can get you to MSRP, if not better, for some in demand models.

nineplay 4y ago
I had a bad experience with a similar service. It led me to a dealership which claimed to have the car I wanted at a < MSRP price. I called the dealership ahead of time and they confirmed they had that car at that price. I got there and oops they forgot to mention that the car had a extra options package that increased the price by $$ also the car, in our opinion, had a manufacture defect which they said was normal. Finally they gave an offer on my trade-in that was about half the bluebook value. Almost on a whim we we stopped at another dealership on our way home and got the same car, sans defect, at a lower price with a higher trade in. I think the dealerships that participate in these services rely on customer trust. The customer wants to believe they are getting the best price and the customer doesn't want to comparison shop, they just want to buy a car and go home. The participating dealership is taking advantage of that. We stumbled upon a effective car-buying technique - come in the dealership late afternoon and tell them, truthfully, that you've got to get home before the baby-sitter leaves in about 45 minutes. We were just planning to test drive but they were motivated. "We want car for X", "You can have it for Y" "We don't have time to bargain we've got to get home" "OK, you have have it for X" We got the car we wanted, the trade-in value we wanted, we brushed aside all discussions of extra features. Gotta go, take it or leave it. We made it home in time and she did really have to leave. We're not good actors, I think we could only get away with it because we were 100% sincere
bluedino 4y ago
In the old days, when Ford manufactured cars in the USA, employees got a discount called the X-plan. If your parents, grandparents, brother, whatever, worked for Ford, you could use the X plan. You could also combine this with whatever other offers Ford was running at the time. You'd often get $8-10,000 off a vehicle, and even more off if you bought a full-size truck.
- 4y ago

joezydeco 4y ago

In a lot of industries the dealership/distributor model smooths out cashflow and inventory. You build a bunch of something, the distributors buy it from you off the dock (or, sometimes, they even pay in advance) and then the distributor sits on the inventory while it sells. It's off of the manufacturer's books and there is cash in hand to buy more supplies. Ford's switchover makes sense if their factories are running 100% flat-out and every car has a waiting customer. Or if it's all made-to-order and the queue is full. What happens if demand drops off? Is Ford going to stack up cars in Dearborn or will they just randomly shut down plants to take up slack? Will you need to prepay for a car so they have the money to make it?

mertd 4y ago
As I understand, walking into a dealer and driving out with a car an hour later is an American thing. In many other countries, cars are made to order.
- throwayyy479087 4y ago
  This is also why euro-spec Mercedes have so many more engine options compared to Americans. in the US 3 engines is a lot for a model, but some German VWs have like 7 choices. You pick the exact one for your needs.
- unethical_ban 4y ago
  Wild. How am I supposed to impulse buy a new Bronco that I don't need if they aren't in stock at the dealer waiting for a signature? No, really. If Land Rover Discovery 2dr were in stock at MSRP there's a high chance I'd have been silly enough to buy it.

BitwiseFool 4y ago

This might be a non-sequitur, but does anyone know why so many car dealerships are named after individuals? I assume it's a marketing gimmick and the answer might be as simple as that.

CalRobert 4y ago
I always thought it was the person who started the dealership....
kube-system 4y ago
It seems to be a thing with lot of franchisees. I guess if they were creative they could come up with their own business ideas :)

post_break 4y ago

Ford dealer wouldn't let me test drive a Fiesta ST. A fiesta... When the Focus RS dropped the dealers tacked on so much bullshit ADM it sank that car. Every new cool mustang? Forget about it. The Bronco? Get the lube out. Raptor? lol you better know the dealer's owner to get close to MSRP. It's a joke out there. Even my Honda Accord I bought last year, I had to call around and see which dealers weren't doing markups, on Accords... The one dealer had a 20k ADM on the two Civic Type Rs they had in the show room. Dealers used to be annoying, now they are straight up highway robbery.

PenguinCoder 4y ago
"It's because of inflation" - that these companies continue to increase through the roof by engaging in corporate greed.
- namlem 4y ago
  In this case it's small business greed, not corporate greed.
mywittyname 4y ago
Ironically, the FoRS sat on lots for ages after the first batch left show rooms. You could find them new well into 2019 (a model year after production stopped, or about 1.5 calendar years). The current car market is making me regret no picking up another cool car in the late 10s. So many great options were on the market for well under MSRP: GT350s, base C7s, 1LE camaros, pre-refresh ND Miatas. Those same cars are probably selling for well over purchase price now, with 50k miles on them.
dr_kretyn 4y ago
What is ADM?
- detaro 4y ago
  "Additional Dealer Markup"

upupandup 4y ago

just as the used car market is imploding he times this response to look like he's doing stuff. the bubble of everything is bursting and we are gonna hear more leaders waving their hand like they are in control (they are not).

czstar 4y ago

There’s a lot of justifiable hate against dealerships but I think the hate against them for markups is not justified. Clearly there are people willing to pay above MSRP. If the dealerships don’t markup the vehicles then scalpers will buy at MSRP and resell the vehicles at a markup. As bad as the dealership experience is there is less chance for fraud or theft at a dealership than from a scalper. In a lot of places there are two scenarios in the local car market. One dealership will sell at MSRP but you’ll have to wait 4 to 6 months. Another has inventory but at a significant markup. You can buy now and pay more or wait a while and pay less. Choose the option that fits your situation. Of course, the best option would be to properly fund public transportation.

AlphaSite 4y ago
I don’t know if car scalping is a major thing, the risk reward doesn’t really work out IMO and arguably the dealership is the one doing the scalping…
- czstar 4y ago
  Car scalping is a thing and it would be a much bigger thing without dealership markups. The markups at the dealership means a smaller market for scalpers. In the absence of dealership markups there would be more scalpers. https://www.motorauthority.com/news/1136687_gm-threatens-dealers-would-be-flippers-with-non-transferrable-warranties https://www.motorauthority.com/news/1136687_gm-threatens-dea...
  - cptskippy 4y ago
    Markups are just scalping with fewer steps.
    - czstar 4y ago
      That is precisely the point I was making. The dealership becomes the scalper. Would you rather pay the scalp price at a dealership with the accompanying regulations and laws surrounding that transaction or pay the scalp price from someone you don’t know with much fewer regulations accompanying that transaction? The scalp market exists. I think it’s better to have that market at a dealership than from people you might not be able to track down in the case something goes wrong.

trixie_ 4y ago

This is another one of Tesla’s innovations/disruptions that is clearly better and the rest of the industry is too stubborn to change even if it’s better for the consumer. No likes being hassled and pressured by a dealer. Does any other car company let you order a car online for a flat price with minimal overhead and have it delivered right to your door? Tesla has fought every other car company state by state with little support to be able to give the consumer a significantly better buying experience. I’m sure if you asked the CEO of Ford today he still wouldn’t support Tesla’s business model. You can’t play both sides.

colinmhayes 4y ago
It’s not stubbornness. It’s literally illegal in 48 states to sell direct if there’s ever been a dealership for their brand in the state. As the video goes over ford os trying really hard to dump dealers, it’s not easy.
- trixie_ 4y ago
  Stubbornness in supporting the direct to consumer business model. Talk is cheap, and other car companies can’t even do that, though this Ford CEO here is starting to crack.
  - colinmhayes 4y ago
    What do you want the cord ceo to do? Selling his cars directly is illegal, it’s just not an option at this point. He instituted a rule that says that the in demand cars have to be sold to the person that ordered them but dealerships essentially told him to fuck off. Now what?
    - trixie_ 4y ago
      Now it’s time to work on changing the laws. Tesla has been going at it alone.
      - 4y ago

dopeboy 4y ago

If I'm selling a product, I can either take on distribution on my own (no dealerships, self-serve) or partner with resellers (dealerships). With the former, I control the entire sales UX and receive a higher price. If we're talking physical goods, I do have to spend more effort getting my product out there for people to inspect, try, etc. With the latter, I'm outsourcing sales to someone else. They have to procure the land, build the showroom, etc. I as the product maker just need to dump my products on them. That person receives a cut of the sale. Assuming I have my understanding above right, I see the following factors challenging the dealership/reseller model: * The product doesn't need to be physically inspected anymore. Much like the purchasing behavior around an iPhone, if the customer can easily grok what's going on a webpage _and_ easily return it, they are more open taking a leap of faith sight unseen or "less seen". At this point, the reseller model brings friction into the process. * The product is so in demand that the reseller accumulates leverage and starts to upcharge which OP's video is related. The product maker has no control over these premiums. In a high volume low margin business with added pressure to eke out anything, the product maker begins to wonder. * Due to high real estate costs, the reseller underserves certain geographies.

yodon 4y ago
The car dealership landscape is legally protected. Car dealers used their local political connections to enact state-wide laws in all states preventing car manufacturers from owning or opening dealerships. That's why Tesla's showrooms are the way they are - Tesla's showrooms are carefully constructed to not get classified as Dealerships under these laws.
namlem 4y ago
Unless your product is cars, in which case you are legally obligated to use the dealership model because most states have passed laws mandating it.

dbetteridge 4y ago

I've had reasonable experiences with the Subaru dealerships Currently have a 2022 Outback on order and final price including drive-away costs in Australia came in at ~3000$ AUD below the online build price. That was including some accessories and delivery costs to a different state from the dealership where I ordered it...

throwayyy479087 4y ago

The Focus ST and RS should have been sales monsters but ADM from dealerships ruined those products. Really quite sad - America hasn't had a good, popular UDM hot hatch in a long time.

bryanlarsen 4y ago

This might be rational behaviour on the part of the dealerships. They're burning their bridges to Ford and their customers, but if your business is going to die anyways you might as profit while it burns. What's going to really kill dealerships is that EV's need so much less maintenance than ICE car's and most of that maintenance is tires and wipers which is highly competitive. Service is where dealerships make the bulk of their money.

Ekaros 4y ago

So free market is working as there is less supply than demand and people are complaining about it for some reason? So there was no issues when you could get car below MSRP?

czstar 4y ago
People commenting on this don’t seem to understand market dynamics. The price people are willing to pay for some vehicles is much greater than the MSRP. Someone along the chain is going to sell those vehicles at the greater price. It’s either the manufacturer in the case of Tesla (they’ve massively raised their prices), or the dealership, or third party scalpers.

dano 4y ago

Purchasing and picking up a Tesla was the best car buying experience of my life. I certainly recommend their sales model.

FloatArtifact 4y ago

I wonder how the absence of dealerships affects the right to repair? This becomes especially important with EVs as companies say they are too complex to be serviced by an individual or even in some cases by a anyone that's not an authorized party/dealership.

TreyGuy 4y ago

we are tracking these dealer markups and addons at https://markups.org https://markups.org https://www.themanual.com/auto/markup-exposes-car-dealership-greed/ https://www.themanual.com/auto/markup-exposes-car-dealership...

alkonaut 4y ago

Which countries still have dealerships of the US kind for new cars? I.e the type that keep a stock of new cars with fixed options, or that are allowed to set prices on new cars that don’t match the ones you get quoted from the manufacturer? In Europe the dealerships, while often operates independently or with only partial ownership from the brand, seem to be mostly showrooms with no large lot of new cars but a small selection of cars only for show/test. The purchase is for a custom built car received through the dealer several months later. In my experience a pleasant way of buying a new car. Usually you visit the dealer having configured a car using the manufacturers online tool which gives you the exact quote. At the dealer you might be recommended to swap some option but usually you just talk it through with the salesperson and place the order. With some luck you might be able to score a bit of a rebate or extras e.g if you use their brand financing or insurance, but for the most part they just help you order the car you configure online for the price you saw online. Where they do fleece you though is “brand service”.

ppetty 4y ago

So I just went to Ford.com and like almost all manufacturer’s sites, I can’t build & price without entering a zip code and immediately after doing so base prices jump for fees including delivery without any options selected. No pricing for me to go to the car is available and prices seem to increase no matter what zip code I enter. The base price seems off no matter how you want to buy. So then if I inquire about a vehicle on lot at local dealers prices are all over the place. But if I look at a 1 year old used vehicle, prices seem to normalize and become much more consistent. Using Carvana & CarMax, the price of a Bronco Sport seems to be free and clear of arbitrary markup. So what is the allure of new? And of buying used from a dealership? They both seem like really bad choices. But maybe there’s some real benefit to new I’m missing? I’m seriously in the market & see a video like this and feel that it reinforces my opinion that I’m better off with a used vehicle for the sake of depreciation I’m avoiding and the nightmare of doing business with price gougers.

beej71 4y ago

I bought a Saturn in 1999, and part of the reason was they published the price and didn't negotiate. It still runs, incidentally. :)

solarkraft 4y ago

Does the US have nothing like CarWow? Their thing is (as far as I understand it) to pit dealers against each other to get a fair price and basically abstract them away as much as possible.