11 ms·

I don't particularly like tesla, much less musk, but this just seems like a win-win. Dealerships are a middleman much more deserving to be ruthlessly demolished

by klabb3 4y ago

I don't particularly like tesla, much less musk, but this just seems like a win-win. Dealerships are a middleman much more deserving to be ruthlessly demolished by "tech disruption" than, say, journalism. It's fascinating, and frankly suspicious, that they're still in business and thriving, given their value proposition in today's world.

rapsey 4y ago
Nothing better than a legal moat around your business model.
badpun 4y ago
What's so bad about American dealerships? Here in Europe I've never heard anyone complain about them. They just provide a service - they have cars available to test drive and have a real person to talk to during the purchase. Sure, the owners make profit, but they DO provide value for the customer and they're at mercy of the car company, which means, in bad economic times, they can get squeezed pretty hard. How is it different in the US?
- jakewins 4y ago
  I’ve bought vehicles at both US and EU dealerships; the EU sales process was; they showed me the vehicle I had seen on their website, we drove the car, then we haggled a bit and signed contracts. US sales process was much more akin to how I imagine time share sales scams work - when you think you’re done, the gauntlet of high pressure multiple-rooms-with-increasingly-“senior”-managers has just started. It took nearly two hours of people telling me I was an idiot for not taking the extended leather steering wheel warranty etc before getting out of there. Both of these experiences were at official Hyundai dealerships.
  - badpun 4y ago
    Interesting. I've only bought car in EU (in Mitsubishi dealership in Poland) and it was BY FAR the best customer service I've received in my life. The salesman was thoughtful, listened to me carefully, knew the product well, didn't try to push anything on me. It was pure pleasure. I was kind of sad that one has to spend $15k in order to warrant a customer experience this good.
    - CubicsRube 4y ago
      Hyundai dealership in Norway: Came to check the car in person and to ask couple of questions. Without any pressure dealer asked me if I wanted to take it for a ride. I agreed reluctantly, expecting that he will be joining. Nope, he just handed me the keys and asked to take a picture of my driving license. I loved the experience so much I ended up buying the car on the spot.
      - JumpCrisscross 4y ago
        > expecting that he will be joining. Nope, he just handed me the keys and asked to take a picture of my driving license To be fair, this was my experience buying a Subaru in Wyoming. The paperwork was then signed, I pushed back on one or two fee line items, they were removed with apologies and I was offered a beer.
        bliteben 4y ago
        I bought a new subaru in wyoming with a personal check and my address registered to general delivery with a similar experience. I was so surprised they didn’t make me get a cashiers check or verify the check. I did later get screwed by the dealership when I was tired of doing my own maintenance after having replaced the timing belt on my truck and let the wife take it in for service and they literally replaced every fluid in the vehicle including brake fluid on a 2 year old vehicle, a $900 service.
        n65463f23_4 4y ago
        in my experience almost all dealers take personal checks, they can get the car or money back from you pretty easily if there is a problem with the check
        bliteben 4y ago
        little harder when I had no address, or employer they could look up
  - mehrdada 4y ago
    I have only experienced the US version firsthand, but hearing from EU friends, it seems the EU prices are more-or-less set in stone and the haggling potential in the US can get you a better deal if you are savvy and patient (and then say no at every “value-add”). Of course that comes at the cost of customer experience.
    - deleted 4y ago
      [deleted]
    - oblio 4y ago
      The rule of thumb is that you can get a lot of stuff cheaper in the US, if you know what you're doing. In Europe discounts are much lower, and prices are a lot more set in stone. However, the key caveat here is that most people don't know what they're doing. So in the US 80% of the population is robbed so that the 20% can take advantage. In Europe everyone gets a worse deal, but it's never going to be super bad. Pick your poison :-)
      - mysterydip 4y ago
        I was sitting at a table at a dealership in process of buying a car and overheard this at the table next to me: "What's the best price you can give me?" "Sir, we advertise our lowest prices up front so you don't have any pressure to haggle." "You can do better than that price." "... Let me see what I can do." I believe he got a grand knocked off when it was all said and done.
        wil421 4y ago
        There are 2 types of dealers in the US. Lowest price advertised volume dealers who will never give you the advertised prices because you’d have to be a Veteran/new College grad/AARP member and use their shitty financing just to qualify. The other dealers focus a little more on the experience and will haggle a bit with you. They usually don’t use high pressure tactics but won’t give you the lowest price.
        4y ago
  - wil421 4y ago
    I’ve bought 4 US cars (not by choice!) in the past 5 years and every single time it’s like your EU experience. 3 of the times I just shut the finance guy down immediately about the warranty crap. I already know the exact car plus options I want and how many other dealerships in the East Coast have them. Ordering a BMW was an even more pleasant experience and haggling for 6% off was easier than when I did it with my Jeeps.
    - gryfft 4y ago
      > I've bought four cars > I just shut the finance guy down immediately > Ordering a BMW These facts paint a pretty obvious picture of why car buying is a much more pleasant experience for you than most: you have experience, you have options, you don't have a lot of patience, and you are willing to loudly signal those things "immediately," leaving no metaphorical door open for a metaphorical foot to slide into. If someone else is reading this it's worth taking into account when you deal with a higher ticket item than you usually would: in those situations, being polite is a huge disadvantage and a good salesperson will take a mile for every micrometer you give them.
      - wil421 4y ago
        My wife got the BMW and I got 2 Jeep Grand Cherokees. I also helped buy a Toyota. I think the Jeep guy played more games but it was still less than 1 hour from test drive to price agreement.
    - spywaregorilla 4y ago
      Ah but you're doing it backwards. Signal that you're a sucker for big insurance packages and they'll lower the price of the vehicle to ensure they get that juicy warranty deal from you. Only then do you change your mind and decide that you don't actually need it.
      - xwdv 4y ago
        This doesn’t work because they just go back and change the price to the original higher MSRP. What you have to do is agree to financing (with no prepayment penalties) in exchange for a discount, and then, before you get the first bill you pay the car off in full.
  - cm42 4y ago
    In my early 20's, I briefly considered getting a new car, or maybe leasing. Insurance would have been more than the monthly car payment, and when I expressed that $400/mo wasn't awful, but $1,000/mo for a car was a non-starter, the guy was seriously like "Well, do you want to eat food, or have a car (with lighted cup holders) to get to work?" and "If you can't afford rent, you can sleep in the car!" That's still one of the dumbest conversations I've ever had.
  - thehappypm 4y ago
    Not to shill, but this is why I buy at Carmax. Prices are as listed, that’s the end of it.
  - tablespoon 4y ago
    > US sales process was; they showed me the vehicle I had seen on their website, we drove the car, then we haggled a bit and signed contracts. US sales process was much more akin to how I imagine time share sales scams work - when you think you’re done, the gauntlet of high pressure multiple-rooms-with-increasingly-“senior”-managers has just started. So basically: it's a culture thing. High pressure tactics are entrenched on the sales culture side, and the customer culture has gotten used to tolerating them. As an aside, IIRC, someone once told me that Japanese makeup is superior to and cheaper than Western makeup, because Japanese customers are picky and won't put up with less. The concept of dealerships makes some sense to me: an individual retail customer has zero leverage with a mass market manufacturer, but they'll have more leverage with a smaller dealer, and the dealer will have more leverage with the manufacturer because they're buying far more than a single person. Though the actual implementation leaves a lot to be desired.
- ralph84 4y ago
  In general dealers are relentless in maximizing their profit on each deal and turn the negotiation into an all-day grind of dealing with overpriced unnecessary add-ons and inflated financing rates. Dealer employees are not employed by the OEM so they don’t care how much damage they do to the OEM’s brand with their tactics.
  - lupire 4y ago
    If you don't have a firm offer via email before you walk in, you are doing it wrong.
- jillesvangurp 4y ago
  They are middlemen adding very limited value. It's not nothing; but maybe also not the thousands of dollars of a cut that they take. The fact that they need protectionist measures like state legislation to prevent competition that simply cuts out the middle man, kind of proves that. It's more of a tax than a value add. Tesla organizes test drives too. And you can bring your Tesla in for maintenance (well not in these states obviously). So, it's not like you don't get any service. It's the protectionism that is bad. Without it, more manufacturers would cut out the middle man and sell directly. Because why give that big of a cut to a middle man you don't need?
- mym1990 4y ago
  American dealerships(only ones I’ve dealt with) make a lot of their money on the auxiliary purchases, so they keep you in rooms, passing you around managers to try to get you to buy these things(extended warranties, extra options, tire changes, yadda yadda). They are also pretty difficult to negotiate with. The service they offer is convenience and possibly peace of mind(over an owner sale), but they sure do take an arm and a leg for it.
  - propogandist 4y ago
    For those in the US considering purchasing the manufacturer warranty coverage (“bumper to bumper”), you can often purchase the same coverage from a different dealer from the one selling the car (whoever offers the best price). Just call a dealers finance department and find out if they sell standalone warranty and get a quote (you may need to provide a sample VIN). Make sure they are quoting the official manufacturer warranty coverage (new car) vs some BS third party warranty. If you do this in advance you can fight off the finance guy easily and (more often) get them to price match to keep your business. This method has saved me thousands.
    - mym1990 4y ago
      Yes, having competitive alternatives in hand is a great bargaining chip, and always giving yourself the option to just get up and walk away. Problem is people get to the dealership and fall in love with the car and all sense goes out the metaphorical window.
      - propogandist 4y ago
        true, they will definitely try FOMO tricks to get the sale instantly, and the above assumes there is research prior to going in and a desire to save $. knowing that warranty can be purchased separately for brand itself is a great way to beat up the finance guy, as that may be where they expect to make the bulk of their profit (although nowadays it may be “market adjustment” and other BS fees)
- elromulous 4y ago
  Whether they provide value is kind of irrelevant, because one (at least in the US) _has_ to go through them. Is their markup equal to the value they provide? We'll never know, because we can't choose to not go through them. If I want to place an order for a vehicle (not buy one off their lot), the dealer does nothing but still makes a cut. Not to mention, the majority of folks selling cars (even new cars) are some of the slimiest you'll meet. They are masters of manipulation. This short NPR piece provides more information: https://www.npr.org/2022/11/09/1135633742/economists-hate-car-dealerships-too https://www.npr.org/2022/11/09/1135633742/economists-hate-ca... P.s. example of manipulation: some years back I bought a used Honda Civic. The 4th person I got passed to made sure to tell me "the civic is the most stolen car in the US", while trying to sell me on some aftermarket alarm system. I of course knew this was an intentionally misleading statistic, but I'm sure many folks could fall for it.
  - vladvasiliu 4y ago
    > Whether they provide value is kind of irrelevant, because one (at least in the US) _has_ to go through them. Is their markup equal to the value they provide? We'll never know, because we can't choose to not go through them. > If I want to place an order for a vehicle (not buy one off their lot), the dealer does nothing but still makes a cut. I'm pretty sure this is the same in Europe, or at least in France. Even if I wanted to buy a local make, say a Renault, I don't know how I'd go about getting in touch with the manufacturer directly instead of going through a dealership. Now I've never actually bought a new car, only motorcycles. And even though it's the same process (I don't think I can order a Honda nor a BMW "direct"), the dealerships didn't try to make me buy useless options.
    - ilyt 4y ago
      >I'm pretty sure this is the same in Europe, or at least in France. Even if I wanted to buy a local make, say a Renault, I don't know how I'd go about getting in touch with the manufacturer directly instead of going through a dealership. The difference is that manufacturer-owner dealership is basically not an option in US. My local Toyota dealership is owned by Toyota. Some other ones are just "licensed" to be their official dealerships, so not owned by Toyota. In US the "licensed" one can decide "well, the car is rare" (and in pandemic that was every car), here is extra 10-20% dealer markup just because we can. In EU, customer would just go to official Toyota one that doesn't do shit like that
- msravi 4y ago
  Maybe. But why are there laws that prohibit companies from selling directly to customers?
  - rgmerk 4y ago
    I haven’t found a good, well-referenced article on this topic, but the short version seems to be lobbying of state governments by car dealers back in the 1930s, and continued lobbying since. Incumbent car manufacturers had no particular incentive to upset the applecart, but Tesla had the opportunity to see how insane it was. Interestingly, BYD has chosen a direct to consumer model here in Australia (if you haven’t heard of them, you soon will). Mercedes has now switched to an agency pricing model where the dealers sell on commission and don’t own the cars, so Mercedes can legally control the retail price.
  - deleted 4y ago
    [deleted]
  - pjc50 4y ago
    Used car dealers are an important part of the political donor base.
    - klabb3 4y ago
      The first time I realized I have to pay sales tax if I sell a used car in the US, big wtf moment. Dealerships don't. I think. A sane tax framework avoids re-taxing products on the second hand market.
- roenxi 4y ago
  Is the idea of making a car then selling it directly to someone who wants it so strange? There is some serious pretzel-thinking going on here somewhere in the halls of power (pretzled, one assumes, by careful application of money). The idea that there needs to be a middle-man is weird. The people who want one less layer of abstraction don't need to justify themselves, the dealers have to be doing a lot more than being not-so-bad to justify a mandatory role in the process. > "The big achievement, instead, was making direct-to-consumer car sales possible." This isn't the biggest problem America faces, but the idea of a business needing to "innovate" to sell its product to consumers has to be the most unAmerican sentences I've read in an article. It is hard to get a more petty strike in against capitalism.
  - ilyt 4y ago
    > It is hard to get a more petty strike in against capitalism. What capitalism ? The dealer problem is precisely because in the past dealerships negotiated for a laws that stops free market from happening
    - Blahah 4y ago
      because resource inequality, unchecked, creates corruption
      - notpushkin 4y ago
        That's not true. Corrupt government creates corruption.
        mftrhu 4y ago
        So, corruption creates corruption?
- ilyt 4y ago
  > What's so bad about American dealerships? Here (in EU) we have anything from manufacturer-led dealership to entirely independent one. But there laws that make it basically forbidden for manufacturers to sell directly and have a lot of protection for dealerships business. Hence no competition. That was made into slapping extra price over MSRP on rarer cars there. That practice started spanning pretty much all cars during pandemic. Here is one example https://www.carscoops.com/2022/11/honda-dealerships-payment-plan-and-markup-on-civic-type-r-would-end-up-costing-90k/ https://www.carscoops.com/2022/11/honda-dealerships-payment-... > They just provide a service - they have cars available to test drive ... sometimes > and have a real person to talk to during the purchase That is almost always clueless about nitty gritty, and just wants to sell you the one they earn most money on.
- cuteboy19 4y ago
  They only exist because it's illegal to do business directly with the consumer. Had they been needed by the customer, they wouldn't fight tooth and nail to keep those laws
  - pvaldes 4y ago
    Is a both ways road. Many brands learned, the hard way, that clients watch on internet but don't buy a new car by internet. Is a too expensive investment. Most people refuse to talk with a robocall and want a local dealership where they can return if they have troubles. Brands are always trying to reduce the number of official dealerships, to discover later that their business has run dry, and are about to be eaten by a bigger brand. Is happening all the time.
    - int_19h 4y ago
      And again, if it was all down to either consumer or manufacturer preference, they wouldn't so heavily lobby for laws that require all transactions to go through the dealerships.
- kylehotchkiss 4y ago
  I bought a car last year during the covid induced car shortages. The first visit to the dealer, I said what I wanted, he went to the back and got a piece of paper with a price and a VIN number, the price matched what the Toyota website said, and I agreed to put down a deposit. The next visit 3 weeks later, I saw the car I was promised, the dealer told me the price which matched the sheet. He gave me the keys for a totally private test drive (he didn’t even come along) and I proceeded to hand over the check and was sent on my way as soon as the DMV paperwork was fulfilled. It was a Toyota dealership in California. They’re not all rotten. I’d happy buy another car from the same salesperson if I was in the market. If I had to guess, dealerships that do fleet sales have less pressure and can treat normal consumers with proper respect.
  - propogandist 4y ago
    Virtually every dealer, for the Japanese brands I am considering, is 2 to 10K+ over MSRP (“market adjustment and dealer adds”) in a 300 mile radius (multiple big metros). These markups are for vehicles they won’t have in stock for months also. Car dealers have discovered they can make huge profits by exploiting the inventory shortage. They’ve also kept some of the most arrogant sales staff (“closers”) who are guaranteed big pay days for every sale. While this isn’t always the case, the days of paying below MSRP appears to be a thing of the past
    - Bluecobra 4y ago
      Had a similar experience a few weeks ago, for example a $25,000 Hyundai Elantra was marked up $8,000 over MSRP. All the Hyundai dealers near me are all pulling the same games and don’t post the actual price on their website so you have to waste time traveling there. Luckily for me I had the option to buy out my lease and won’t ever do business with any of these dealers again.
      - propogandist 4y ago
        I came across https://markups.org https://markups.org, in my research, which crowdsources info on dealer markups. It will give you a ballpark if a dealer should be avoided outright. Calling the sales department and asking for market adjustment and dealer adds info for make/model is also recommended. Most sales people, although not all, will disclose rough numbers.
- TulliusCicero 4y ago
  Dealerships in the US make a lot of money by convincing people to take bad deals. They're known for being sleezy and exploitative by default, as the model encourages that. A lot of people want to be able to buy a car the way they buy almost any other consumer product: easily, for a set price they can research ahead of time. Dealerships stand in the way of that.
  - e-clinton 4y ago
    I think that’s limited to lower end brands and the “sells any brand” dealership. My experience with luxury dealership has been nothing but positive. Yes, you still have to negotiate, but they won’t spring shady deals from random banks or tack on unnecessary “dealer fees”. Even when buying used cars, I go to name brand dealerships for a more predictable experience.
    - thorncorona 4y ago
      The number of people who will buy at a luxury dealership are vastly smaller than those who will go to low end dealerships.
      - arvindamirtaa 4y ago
        Like Teslas?
        oblio 4y ago
        Yeah, but then we run into another problem. If Tesla truly wants to remain a luxury brand forever, its market cap should reflect that. It shouldn't be the market cap of the next Toyota (car maker) and Panasonic (battery maker) combined and multiplied by 10.
        KptMarchewa 4y ago
        AFAIK, they eventually want to provide "Model 2" for about 60-70% of Model 3 price. They need to scale up their whole operations to be able to profit off of that.
- subpixel 4y ago
  My dealership tried to sell me tires at $300/each. At a tire shop I got comparable tires for about 60% of that. Dealerships make a lot of money via convenience (you’re already here for your 30k service) and just plain ignorance (most people have no idea what makes their car work or what repair cost is fair).
  - bluedino 4y ago
    That's weird. Dealers are known for marking up parts and service, but around here they are aggressively price matching the local tire stores
- AdrianB1 4y ago
  Dealership in Europe is not so good either. Real example: I bought a motorcycle from one of the 2 dealers in the country. I had to do the first oil change at the dealership in order not to lose the warranty (in my country, in US you can change the oil at home). They charged 100 EUR for an oil change, including 1h hour of workmanship, when it took less than 15 minutes from parking in front of the dealership to leaving the building with the work done and paperwork complete. For a car, the oil change was 300 EUR at the dealership, same problem with losing the warranty. In that case it took one hour - no idea why because it takes just 10 minutes of actual work and there was no wait time to cool the engine and oil, they were almost cold.
- wongarsu 4y ago
  One thing that keeps European dealerships a pleasurable experience is that they have to compete with direct sales. I can just go on Volkswagen's website, configure the car I want and have it delivered. That means dealerships have to provide value to stay in business. In the US you don't have direct sales (except for Tesla), so even if dealerships provide negative value they still stay in business, as long as all of them provide about the same amount of (negative) value.
- notyourwork 4y ago
  Bought two cars, brand new. Never again. Dealers are abusive, scammy and inconsiderate. It’s such an arduous process that I dread the next car purchase coming up for my wife in next two years.
- ajvs 4y ago
  There was an Adam Ruins Everything episode about car dealerships in the US, from what I remember US lawmakers have made it so it's not a free market compared to the EU. I think it's similar to how US ISPs maintain monopolies in certain areas.
- newsclues 4y ago
  They don't have to compete against the factory to make sales, so they just have to compete with other middlemen selling the same commodity, which is a great situation for an anti-consumer cartel to form.
GuB-42 4y ago
Maybe it is not very relevant today but car dealers offer a range of service unrelated to building cars, such as dealing with vehicle registration, insurance and financing. In the case of Tesla, it is more accurate to say that they are their own dealer since they provide services like financing and registration. They even have their own insurance. Of course, these services are not free, and neither are test drives and showrooms, they are included in the price of the car. The difference with the traditional dealership model is that they only sell Teslas, and that they don't want other dealers to sell Teslas. In a sense, they are anticompetitive. Yes, I am playing devil's advocate here, but that's to say there is a reason for this dealership law.
- klabb3 4y ago
  > dealing with vehicle registration, insurance and financing. Isn't this just more middlemen they set you up with, and government bureaucracy that ought to be self-evident? From what I hear the average dealership is about the worst option, the typical sales swindle of information asymmetry and other adversarial games? I mean, it's basically right there in the name. Granted, most of my knowledge is second hand..
  - adwww 4y ago
    Yeah what I hate about dealerships is that they usually have at least four ways to screw you, and it's pretty hard for a layperson to negotiate fairly on all of them. ie. Trade in price for old car, purchase price for new car, rate of finance, cost of extended warranties.
    - martin_a 4y ago
      You can do three out of four things by your own. But is it easier if a dealership takes care of that for you? For sure. Will they take a share of everything then? For sure. I don't understand all the complaining about dealerships in this thread, but maybe it's because I'm from the EU.
idop 4y ago
If there's anything Tesla seems to have proven, it's that dealerships are actually good (or at least better) for the customer. Tesla customers are a captive audience wholly dependent on a startup with no customer service. Non-Tesla customers have virtually infinite options, and someone to actually take care of them. I suggest you read even the most die-hard Tesla fansites and see just how bad Tesla's anti-dealership strategy is for the customer.
- drcross 4y ago
  >no customer service I own a Tesla and have had no problems with customer service. What I do have a problem with is negotiating a price for a vehicle from a slimy dealership agent who have a litany of techniques to increase their profit for no good reason. On the Tesla website the price you pay is the price that everyone pays.
  - arcticbull 4y ago
    I agree their pricing model is good, but that has nothing to do with the value proposition of dealerships - just their approach to pricing. Ford could mandate flat pricing overnight to all their dealers too. It's just never been in corporate's interest, until now. For example a MacBook costs the same at BestBuy as it does at an Apple store as it does at apple.com I'm hardly a Musk fanboy, in fact I have strong negative opinions about the, er, gentleman, but this push towards flat pricing and allowing sales directly to individuals is imo an unequivocal good. If the price everyone pays is the same online and at the dealerships then dealerships can prove their value to the customer - or not.
    - fragmede 4y ago
      Ford tried with the F150 Lightning and the top end Mustangs, but the dealers all decided they like money more, so you're not getting either of those for anywhere near MSRP. Not for lack of trying by Ford though: https://www.hotcars.com/ford-cracking-down-greedy-dealers-markup/ https://www.hotcars.com/ford-cracking-down-greedy-dealers-ma...
benj111 4y ago
>Dealerships are a middleman much more deserving to be ruthlessly demolished by "tech disruption" than, say, journalism Why are you inserting a moral position here? The world economy runs on middle men. I know of no-one that goes to the local ore mine to build their own car. The industry is literally built on middle men. If you want to make the argument that there are laws protecting their middle man position that are now out dated that's one thing, but absent that they are obviously providing a service people find valuable.
- kangalioo 4y ago
  Most middlemen are useful, but some are not. The article explains this: > They had to work through dealerships as middlemen [...] largely as a way of spreading risk. [...] Those conditions are, arguably, gone today.
  - listenallyall 4y ago
    There's no explanation there, just a declaration without evidence, or much thought. For example, someone still needs to deliver the keys, and the vehicle itself, of your online order. UPS might be able to deliver the keys, the car itself, probably not.
  - benj111 4y ago
    Ok, if they aren't useful, the market can decide that. If the market can't decide because of laws in place then the blame should more properly be placed on the laws. Personally I would say car companies are manufacturers. They should concentrate on manufacturing and let the dealerships concentrate on the customer, so I don't really accept the thesis that they're useless.
- fallingknife 4y ago
  That's not a middleman. A middleman buys and sells the exact same product. In this case, the steel mill buys ore from the mine, turns it into steel, and sells it to the car company. The "turns it into steel" part is what differentiates them from a middleman.
somat 4y ago
Here is a well researched youtube video on the subject. https://www.youtube.com/watch?v=meHYBhcpdvQ https://www.youtube.com/watch?v=meHYBhcpdvQ And on that subject. What may be the best channel on youtube, amazingly well researched, written, shot, presented... and it's a(incredulous tone) motorcycle channel?!
listenallyall 4y ago
They hold inventory. That's a massive benefit to both the consumer and the manufacturer. Even if you dismiss everything else they provide (which would be unwise), that itself is enough to justify their existence.
- pvaldes 4y ago
  Inventory. Good point. Brands use dealerships as captive clients of their new cars. Then they can claim that had "sell" X cars of this model yet, when in fact are pushing dealerships to buy a percentage of those cars as requisite to keep the brand image.
  - listenallyall 4y ago
    Dealerships are businesses, and are free to sever their relationship with the manufacturer. The fact that very few actually do, is evidence that your argument has little merit. Many dealerships seek to increase their allotment of cars to sell.
    - pvaldes 4y ago
      Of course they are, everybody is free to do whatever it pleases to them, but this was not my point. In some cases is an allotment, is a borrow. In other not. The dealerships aren't borrowing cars from the maker, they are "forced" to buy those cars from the maker with their own money, and they resell the cars later to recover the money. Is called a "zero Km" car. The maker is selling the dealership X cars each year, and they are thousands of dealerships in each country, so the maker has thousands of sold cars guaranteed even before the car is the market. Official dealerships are lending money to the brands all the time.
      - listenallyall 4y ago
        > this was not my point Even after reading your second comment, I have no idea what your complaint is. Again, if it was so awful, the dealerships would abandon the manufacturer.
Sakos 4y ago
I'm confused by all the comments here. Why is everybody so focused on the cons of dealerships instead of the cons if manufacturers own and run all the dealerships and the potential consequences, or even why it was regulated to be this way in the first place.
- ceejayoz 4y ago
  Would you like to highlight some? Why was it regulated this way? I can't find a great explanation, and "because it makes a lot of money for locally powerful business owners" seems to be the most common explanation floated.
  - Sakos 4y ago
    I'm not familiar enough with the topic to be able to contribute meaningfully. It feels like most people here aren't, it's mostly anecdata with a tinge of libertarianism. At most I can say I'm vaguely aware that early in US history there were a lot of issues around monopolies/oligopolies (see company towns) that lead to antitrust laws and by extension laws regarding dealerships. But I'd have to do more research to be able to say anything more concrete.
- mdorazio 4y ago
  I've worked for several OEMs and have talked to dealers about this a bit. Here's a quick run-down. No domestic OEM sprang into existence with billions of dollars in the bank to spin up a nationwide network of showrooms and repair centers. As they were growing production slowly, they had to rely on small businesses around the country to sell their products for them, which also significantly improved capital when they were growing (dealers bought from the OEM, then sold to customers, potentially thousands of miles away from factories). Over time, these businesses became franchised by the OEMs to allow them to exert some control over the customer experience, standardize parts and repair work, etc. So that's why dealers became a thing in the first place. The tricky bit of the history is why the state laws in favor of dealers came into existence. It's very fuzzy, but in effect the Detroit "big three" became very large and powerful, with enough money to start stepping in with company-owned dealerships. The local franchised dealers, who by that time had also become quite embedded in communities and politics, thought that this was unfair since the OEMs could undercut local dealers on price, thus they lobbied their states to put in place anti-competition laws. And they were successful. That's about it. As far as I've ever been able to tell, customer experience and monopoly prevention never really factored into it other than as dubious arguments by the dealers themselves. Now here we are ~70 years later and the market has changed significantly, but the protection laws are still there. Fwiw, dealer margins vary by vehicle and brand, but 5-10% for mass market vehicles is common. That's money the OEMs would rather not pay out to third parties. Dealers also have massive markups on service and love warranty work because they can rake OEMs over the coals with it. The best argument I've seen in favor of dealers is that an OEM-run dealership would be incentivized to some degree to dismiss warranty work as unnecessary, while a franchised dealer tries to find every warranty hour they possibly can. That's about it, though - there's so much brand and 3rd party competition in the market these days that other arguments usually don't make much sense.

by klabb3 4y ago

rapsey 4y ago

Nothing better than a legal moat around your business model.

badpun 4y ago

What's so bad about American dealerships? Here in Europe I've never heard anyone complain about them. They just provide a service - they have cars available to test drive and have a real person to talk to during the purchase. Sure, the owners make profit, but they DO provide value for the customer and they're at mercy of the car company, which means, in bad economic times, they can get squeezed pretty hard. How is it different in the US?

jakewins 4y ago
I’ve bought vehicles at both US and EU dealerships; the EU sales process was; they showed me the vehicle I had seen on their website, we drove the car, then we haggled a bit and signed contracts. US sales process was much more akin to how I imagine time share sales scams work - when you think you’re done, the gauntlet of high pressure multiple-rooms-with-increasingly-“senior”-managers has just started. It took nearly two hours of people telling me I was an idiot for not taking the extended leather steering wheel warranty etc before getting out of there. Both of these experiences were at official Hyundai dealerships.
- badpun 4y ago
  Interesting. I've only bought car in EU (in Mitsubishi dealership in Poland) and it was BY FAR the best customer service I've received in my life. The salesman was thoughtful, listened to me carefully, knew the product well, didn't try to push anything on me. It was pure pleasure. I was kind of sad that one has to spend $15k in order to warrant a customer experience this good.
  - CubicsRube 4y ago
    Hyundai dealership in Norway: Came to check the car in person and to ask couple of questions. Without any pressure dealer asked me if I wanted to take it for a ride. I agreed reluctantly, expecting that he will be joining. Nope, he just handed me the keys and asked to take a picture of my driving license. I loved the experience so much I ended up buying the car on the spot.
    - JumpCrisscross 4y ago
      > expecting that he will be joining. Nope, he just handed me the keys and asked to take a picture of my driving license To be fair, this was my experience buying a Subaru in Wyoming. The paperwork was then signed, I pushed back on one or two fee line items, they were removed with apologies and I was offered a beer.
      - bliteben 4y ago
        I bought a new subaru in wyoming with a personal check and my address registered to general delivery with a similar experience. I was so surprised they didn’t make me get a cashiers check or verify the check. I did later get screwed by the dealership when I was tired of doing my own maintenance after having replaced the timing belt on my truck and let the wife take it in for service and they literally replaced every fluid in the vehicle including brake fluid on a 2 year old vehicle, a $900 service.
        n65463f23_4 4y ago
        in my experience almost all dealers take personal checks, they can get the car or money back from you pretty easily if there is a problem with the check
        bliteben 4y ago
        little harder when I had no address, or employer they could look up
- mehrdada 4y ago
  I have only experienced the US version firsthand, but hearing from EU friends, it seems the EU prices are more-or-less set in stone and the haggling potential in the US can get you a better deal if you are savvy and patient (and then say no at every “value-add”). Of course that comes at the cost of customer experience.
  - deleted 4y ago
    [deleted]
  - oblio 4y ago
    The rule of thumb is that you can get a lot of stuff cheaper in the US, if you know what you're doing. In Europe discounts are much lower, and prices are a lot more set in stone. However, the key caveat here is that most people don't know what they're doing. So in the US 80% of the population is robbed so that the 20% can take advantage. In Europe everyone gets a worse deal, but it's never going to be super bad. Pick your poison :-)
    - mysterydip 4y ago
      I was sitting at a table at a dealership in process of buying a car and overheard this at the table next to me: "What's the best price you can give me?" "Sir, we advertise our lowest prices up front so you don't have any pressure to haggle." "You can do better than that price." "... Let me see what I can do." I believe he got a grand knocked off when it was all said and done.
      - wil421 4y ago
        There are 2 types of dealers in the US. Lowest price advertised volume dealers who will never give you the advertised prices because you’d have to be a Veteran/new College grad/AARP member and use their shitty financing just to qualify. The other dealers focus a little more on the experience and will haggle a bit with you. They usually don’t use high pressure tactics but won’t give you the lowest price.
        4y ago
- wil421 4y ago
  I’ve bought 4 US cars (not by choice!) in the past 5 years and every single time it’s like your EU experience. 3 of the times I just shut the finance guy down immediately about the warranty crap. I already know the exact car plus options I want and how many other dealerships in the East Coast have them. Ordering a BMW was an even more pleasant experience and haggling for 6% off was easier than when I did it with my Jeeps.
  - gryfft 4y ago
    > I've bought four cars > I just shut the finance guy down immediately > Ordering a BMW These facts paint a pretty obvious picture of why car buying is a much more pleasant experience for you than most: you have experience, you have options, you don't have a lot of patience, and you are willing to loudly signal those things "immediately," leaving no metaphorical door open for a metaphorical foot to slide into. If someone else is reading this it's worth taking into account when you deal with a higher ticket item than you usually would: in those situations, being polite is a huge disadvantage and a good salesperson will take a mile for every micrometer you give them.
    - wil421 4y ago
      My wife got the BMW and I got 2 Jeep Grand Cherokees. I also helped buy a Toyota. I think the Jeep guy played more games but it was still less than 1 hour from test drive to price agreement.
  - spywaregorilla 4y ago
    Ah but you're doing it backwards. Signal that you're a sucker for big insurance packages and they'll lower the price of the vehicle to ensure they get that juicy warranty deal from you. Only then do you change your mind and decide that you don't actually need it.
    - xwdv 4y ago
      This doesn’t work because they just go back and change the price to the original higher MSRP. What you have to do is agree to financing (with no prepayment penalties) in exchange for a discount, and then, before you get the first bill you pay the car off in full.
- cm42 4y ago
  In my early 20's, I briefly considered getting a new car, or maybe leasing. Insurance would have been more than the monthly car payment, and when I expressed that $400/mo wasn't awful, but $1,000/mo for a car was a non-starter, the guy was seriously like "Well, do you want to eat food, or have a car (with lighted cup holders) to get to work?" and "If you can't afford rent, you can sleep in the car!" That's still one of the dumbest conversations I've ever had.
- thehappypm 4y ago
  Not to shill, but this is why I buy at Carmax. Prices are as listed, that’s the end of it.
- tablespoon 4y ago
  > US sales process was; they showed me the vehicle I had seen on their website, we drove the car, then we haggled a bit and signed contracts. US sales process was much more akin to how I imagine time share sales scams work - when you think you’re done, the gauntlet of high pressure multiple-rooms-with-increasingly-“senior”-managers has just started. So basically: it's a culture thing. High pressure tactics are entrenched on the sales culture side, and the customer culture has gotten used to tolerating them. As an aside, IIRC, someone once told me that Japanese makeup is superior to and cheaper than Western makeup, because Japanese customers are picky and won't put up with less. The concept of dealerships makes some sense to me: an individual retail customer has zero leverage with a mass market manufacturer, but they'll have more leverage with a smaller dealer, and the dealer will have more leverage with the manufacturer because they're buying far more than a single person. Though the actual implementation leaves a lot to be desired.
ralph84 4y ago
In general dealers are relentless in maximizing their profit on each deal and turn the negotiation into an all-day grind of dealing with overpriced unnecessary add-ons and inflated financing rates. Dealer employees are not employed by the OEM so they don’t care how much damage they do to the OEM’s brand with their tactics.
- lupire 4y ago
  If you don't have a firm offer via email before you walk in, you are doing it wrong.
jillesvangurp 4y ago
They are middlemen adding very limited value. It's not nothing; but maybe also not the thousands of dollars of a cut that they take. The fact that they need protectionist measures like state legislation to prevent competition that simply cuts out the middle man, kind of proves that. It's more of a tax than a value add. Tesla organizes test drives too. And you can bring your Tesla in for maintenance (well not in these states obviously). So, it's not like you don't get any service. It's the protectionism that is bad. Without it, more manufacturers would cut out the middle man and sell directly. Because why give that big of a cut to a middle man you don't need?
mym1990 4y ago
American dealerships(only ones I’ve dealt with) make a lot of their money on the auxiliary purchases, so they keep you in rooms, passing you around managers to try to get you to buy these things(extended warranties, extra options, tire changes, yadda yadda). They are also pretty difficult to negotiate with. The service they offer is convenience and possibly peace of mind(over an owner sale), but they sure do take an arm and a leg for it.
- propogandist 4y ago
  For those in the US considering purchasing the manufacturer warranty coverage (“bumper to bumper”), you can often purchase the same coverage from a different dealer from the one selling the car (whoever offers the best price). Just call a dealers finance department and find out if they sell standalone warranty and get a quote (you may need to provide a sample VIN). Make sure they are quoting the official manufacturer warranty coverage (new car) vs some BS third party warranty. If you do this in advance you can fight off the finance guy easily and (more often) get them to price match to keep your business. This method has saved me thousands.
  - mym1990 4y ago
    Yes, having competitive alternatives in hand is a great bargaining chip, and always giving yourself the option to just get up and walk away. Problem is people get to the dealership and fall in love with the car and all sense goes out the metaphorical window.
    - propogandist 4y ago
      true, they will definitely try FOMO tricks to get the sale instantly, and the above assumes there is research prior to going in and a desire to save $. knowing that warranty can be purchased separately for brand itself is a great way to beat up the finance guy, as that may be where they expect to make the bulk of their profit (although nowadays it may be “market adjustment” and other BS fees)
elromulous 4y ago
Whether they provide value is kind of irrelevant, because one (at least in the US) _has_ to go through them. Is their markup equal to the value they provide? We'll never know, because we can't choose to not go through them. If I want to place an order for a vehicle (not buy one off their lot), the dealer does nothing but still makes a cut. Not to mention, the majority of folks selling cars (even new cars) are some of the slimiest you'll meet. They are masters of manipulation. This short NPR piece provides more information: https://www.npr.org/2022/11/09/1135633742/economists-hate-car-dealerships-too https://www.npr.org/2022/11/09/1135633742/economists-hate-ca... P.s. example of manipulation: some years back I bought a used Honda Civic. The 4th person I got passed to made sure to tell me "the civic is the most stolen car in the US", while trying to sell me on some aftermarket alarm system. I of course knew this was an intentionally misleading statistic, but I'm sure many folks could fall for it.
- vladvasiliu 4y ago
  > Whether they provide value is kind of irrelevant, because one (at least in the US) _has_ to go through them. Is their markup equal to the value they provide? We'll never know, because we can't choose to not go through them. > If I want to place an order for a vehicle (not buy one off their lot), the dealer does nothing but still makes a cut. I'm pretty sure this is the same in Europe, or at least in France. Even if I wanted to buy a local make, say a Renault, I don't know how I'd go about getting in touch with the manufacturer directly instead of going through a dealership. Now I've never actually bought a new car, only motorcycles. And even though it's the same process (I don't think I can order a Honda nor a BMW "direct"), the dealerships didn't try to make me buy useless options.
  - ilyt 4y ago
    >I'm pretty sure this is the same in Europe, or at least in France. Even if I wanted to buy a local make, say a Renault, I don't know how I'd go about getting in touch with the manufacturer directly instead of going through a dealership. The difference is that manufacturer-owner dealership is basically not an option in US. My local Toyota dealership is owned by Toyota. Some other ones are just "licensed" to be their official dealerships, so not owned by Toyota. In US the "licensed" one can decide "well, the car is rare" (and in pandemic that was every car), here is extra 10-20% dealer markup just because we can. In EU, customer would just go to official Toyota one that doesn't do shit like that
msravi 4y ago
Maybe. But why are there laws that prohibit companies from selling directly to customers?
- rgmerk 4y ago
  I haven’t found a good, well-referenced article on this topic, but the short version seems to be lobbying of state governments by car dealers back in the 1930s, and continued lobbying since. Incumbent car manufacturers had no particular incentive to upset the applecart, but Tesla had the opportunity to see how insane it was. Interestingly, BYD has chosen a direct to consumer model here in Australia (if you haven’t heard of them, you soon will). Mercedes has now switched to an agency pricing model where the dealers sell on commission and don’t own the cars, so Mercedes can legally control the retail price.
- deleted 4y ago
  [deleted]
- pjc50 4y ago
  Used car dealers are an important part of the political donor base.
  - klabb3 4y ago
    The first time I realized I have to pay sales tax if I sell a used car in the US, big wtf moment. Dealerships don't. I think. A sane tax framework avoids re-taxing products on the second hand market.
roenxi 4y ago
Is the idea of making a car then selling it directly to someone who wants it so strange? There is some serious pretzel-thinking going on here somewhere in the halls of power (pretzled, one assumes, by careful application of money). The idea that there needs to be a middle-man is weird. The people who want one less layer of abstraction don't need to justify themselves, the dealers have to be doing a lot more than being not-so-bad to justify a mandatory role in the process. > "The big achievement, instead, was making direct-to-consumer car sales possible." This isn't the biggest problem America faces, but the idea of a business needing to "innovate" to sell its product to consumers has to be the most unAmerican sentences I've read in an article. It is hard to get a more petty strike in against capitalism.
- ilyt 4y ago
  > It is hard to get a more petty strike in against capitalism. What capitalism ? The dealer problem is precisely because in the past dealerships negotiated for a laws that stops free market from happening
  - Blahah 4y ago
    because resource inequality, unchecked, creates corruption
    - notpushkin 4y ago
      That's not true. Corrupt government creates corruption.
      - mftrhu 4y ago
        So, corruption creates corruption?
ilyt 4y ago
> What's so bad about American dealerships? Here (in EU) we have anything from manufacturer-led dealership to entirely independent one. But there laws that make it basically forbidden for manufacturers to sell directly and have a lot of protection for dealerships business. Hence no competition. That was made into slapping extra price over MSRP on rarer cars there. That practice started spanning pretty much all cars during pandemic. Here is one example https://www.carscoops.com/2022/11/honda-dealerships-payment-plan-and-markup-on-civic-type-r-would-end-up-costing-90k/ https://www.carscoops.com/2022/11/honda-dealerships-payment-... > They just provide a service - they have cars available to test drive ... sometimes > and have a real person to talk to during the purchase That is almost always clueless about nitty gritty, and just wants to sell you the one they earn most money on.
cuteboy19 4y ago
They only exist because it's illegal to do business directly with the consumer. Had they been needed by the customer, they wouldn't fight tooth and nail to keep those laws
- pvaldes 4y ago
  Is a both ways road. Many brands learned, the hard way, that clients watch on internet but don't buy a new car by internet. Is a too expensive investment. Most people refuse to talk with a robocall and want a local dealership where they can return if they have troubles. Brands are always trying to reduce the number of official dealerships, to discover later that their business has run dry, and are about to be eaten by a bigger brand. Is happening all the time.
  - int_19h 4y ago
    And again, if it was all down to either consumer or manufacturer preference, they wouldn't so heavily lobby for laws that require all transactions to go through the dealerships.
kylehotchkiss 4y ago
I bought a car last year during the covid induced car shortages. The first visit to the dealer, I said what I wanted, he went to the back and got a piece of paper with a price and a VIN number, the price matched what the Toyota website said, and I agreed to put down a deposit. The next visit 3 weeks later, I saw the car I was promised, the dealer told me the price which matched the sheet. He gave me the keys for a totally private test drive (he didn’t even come along) and I proceeded to hand over the check and was sent on my way as soon as the DMV paperwork was fulfilled. It was a Toyota dealership in California. They’re not all rotten. I’d happy buy another car from the same salesperson if I was in the market. If I had to guess, dealerships that do fleet sales have less pressure and can treat normal consumers with proper respect.
- propogandist 4y ago
  Virtually every dealer, for the Japanese brands I am considering, is 2 to 10K+ over MSRP (“market adjustment and dealer adds”) in a 300 mile radius (multiple big metros). These markups are for vehicles they won’t have in stock for months also. Car dealers have discovered they can make huge profits by exploiting the inventory shortage. They’ve also kept some of the most arrogant sales staff (“closers”) who are guaranteed big pay days for every sale. While this isn’t always the case, the days of paying below MSRP appears to be a thing of the past
  - Bluecobra 4y ago
    Had a similar experience a few weeks ago, for example a $25,000 Hyundai Elantra was marked up $8,000 over MSRP. All the Hyundai dealers near me are all pulling the same games and don’t post the actual price on their website so you have to waste time traveling there. Luckily for me I had the option to buy out my lease and won’t ever do business with any of these dealers again.
    - propogandist 4y ago
      I came across https://markups.org https://markups.org, in my research, which crowdsources info on dealer markups. It will give you a ballpark if a dealer should be avoided outright. Calling the sales department and asking for market adjustment and dealer adds info for make/model is also recommended. Most sales people, although not all, will disclose rough numbers.
TulliusCicero 4y ago
Dealerships in the US make a lot of money by convincing people to take bad deals. They're known for being sleezy and exploitative by default, as the model encourages that. A lot of people want to be able to buy a car the way they buy almost any other consumer product: easily, for a set price they can research ahead of time. Dealerships stand in the way of that.
- e-clinton 4y ago
  I think that’s limited to lower end brands and the “sells any brand” dealership. My experience with luxury dealership has been nothing but positive. Yes, you still have to negotiate, but they won’t spring shady deals from random banks or tack on unnecessary “dealer fees”. Even when buying used cars, I go to name brand dealerships for a more predictable experience.
  - thorncorona 4y ago
    The number of people who will buy at a luxury dealership are vastly smaller than those who will go to low end dealerships.
    - arvindamirtaa 4y ago
      Like Teslas?
      - oblio 4y ago
        Yeah, but then we run into another problem. If Tesla truly wants to remain a luxury brand forever, its market cap should reflect that. It shouldn't be the market cap of the next Toyota (car maker) and Panasonic (battery maker) combined and multiplied by 10.
        KptMarchewa 4y ago
        AFAIK, they eventually want to provide "Model 2" for about 60-70% of Model 3 price. They need to scale up their whole operations to be able to profit off of that.
subpixel 4y ago
My dealership tried to sell me tires at $300/each. At a tire shop I got comparable tires for about 60% of that. Dealerships make a lot of money via convenience (you’re already here for your 30k service) and just plain ignorance (most people have no idea what makes their car work or what repair cost is fair).
- bluedino 4y ago
  That's weird. Dealers are known for marking up parts and service, but around here they are aggressively price matching the local tire stores
AdrianB1 4y ago
Dealership in Europe is not so good either. Real example: I bought a motorcycle from one of the 2 dealers in the country. I had to do the first oil change at the dealership in order not to lose the warranty (in my country, in US you can change the oil at home). They charged 100 EUR for an oil change, including 1h hour of workmanship, when it took less than 15 minutes from parking in front of the dealership to leaving the building with the work done and paperwork complete. For a car, the oil change was 300 EUR at the dealership, same problem with losing the warranty. In that case it took one hour - no idea why because it takes just 10 minutes of actual work and there was no wait time to cool the engine and oil, they were almost cold.
wongarsu 4y ago
One thing that keeps European dealerships a pleasurable experience is that they have to compete with direct sales. I can just go on Volkswagen's website, configure the car I want and have it delivered. That means dealerships have to provide value to stay in business. In the US you don't have direct sales (except for Tesla), so even if dealerships provide negative value they still stay in business, as long as all of them provide about the same amount of (negative) value.
notyourwork 4y ago
Bought two cars, brand new. Never again. Dealers are abusive, scammy and inconsiderate. It’s such an arduous process that I dread the next car purchase coming up for my wife in next two years.
ajvs 4y ago
There was an Adam Ruins Everything episode about car dealerships in the US, from what I remember US lawmakers have made it so it's not a free market compared to the EU. I think it's similar to how US ISPs maintain monopolies in certain areas.
newsclues 4y ago
They don't have to compete against the factory to make sales, so they just have to compete with other middlemen selling the same commodity, which is a great situation for an anti-consumer cartel to form.

GuB-42 4y ago

Maybe it is not very relevant today but car dealers offer a range of service unrelated to building cars, such as dealing with vehicle registration, insurance and financing. In the case of Tesla, it is more accurate to say that they are their own dealer since they provide services like financing and registration. They even have their own insurance. Of course, these services are not free, and neither are test drives and showrooms, they are included in the price of the car. The difference with the traditional dealership model is that they only sell Teslas, and that they don't want other dealers to sell Teslas. In a sense, they are anticompetitive. Yes, I am playing devil's advocate here, but that's to say there is a reason for this dealership law.

klabb3 4y ago
> dealing with vehicle registration, insurance and financing. Isn't this just more middlemen they set you up with, and government bureaucracy that ought to be self-evident? From what I hear the average dealership is about the worst option, the typical sales swindle of information asymmetry and other adversarial games? I mean, it's basically right there in the name. Granted, most of my knowledge is second hand..
- adwww 4y ago
  Yeah what I hate about dealerships is that they usually have at least four ways to screw you, and it's pretty hard for a layperson to negotiate fairly on all of them. ie. Trade in price for old car, purchase price for new car, rate of finance, cost of extended warranties.
  - martin_a 4y ago
    You can do three out of four things by your own. But is it easier if a dealership takes care of that for you? For sure. Will they take a share of everything then? For sure. I don't understand all the complaining about dealerships in this thread, but maybe it's because I'm from the EU.

idop 4y ago

If there's anything Tesla seems to have proven, it's that dealerships are actually good (or at least better) for the customer. Tesla customers are a captive audience wholly dependent on a startup with no customer service. Non-Tesla customers have virtually infinite options, and someone to actually take care of them. I suggest you read even the most die-hard Tesla fansites and see just how bad Tesla's anti-dealership strategy is for the customer.

drcross 4y ago
>no customer service I own a Tesla and have had no problems with customer service. What I do have a problem with is negotiating a price for a vehicle from a slimy dealership agent who have a litany of techniques to increase their profit for no good reason. On the Tesla website the price you pay is the price that everyone pays.
- arcticbull 4y ago
  I agree their pricing model is good, but that has nothing to do with the value proposition of dealerships - just their approach to pricing. Ford could mandate flat pricing overnight to all their dealers too. It's just never been in corporate's interest, until now. For example a MacBook costs the same at BestBuy as it does at an Apple store as it does at apple.com I'm hardly a Musk fanboy, in fact I have strong negative opinions about the, er, gentleman, but this push towards flat pricing and allowing sales directly to individuals is imo an unequivocal good. If the price everyone pays is the same online and at the dealerships then dealerships can prove their value to the customer - or not.
  - fragmede 4y ago
    Ford tried with the F150 Lightning and the top end Mustangs, but the dealers all decided they like money more, so you're not getting either of those for anywhere near MSRP. Not for lack of trying by Ford though: https://www.hotcars.com/ford-cracking-down-greedy-dealers-markup/ https://www.hotcars.com/ford-cracking-down-greedy-dealers-ma...

benj111 4y ago

>Dealerships are a middleman much more deserving to be ruthlessly demolished by "tech disruption" than, say, journalism Why are you inserting a moral position here? The world economy runs on middle men. I know of no-one that goes to the local ore mine to build their own car. The industry is literally built on middle men. If you want to make the argument that there are laws protecting their middle man position that are now out dated that's one thing, but absent that they are obviously providing a service people find valuable.

kangalioo 4y ago
Most middlemen are useful, but some are not. The article explains this: > They had to work through dealerships as middlemen [...] largely as a way of spreading risk. [...] Those conditions are, arguably, gone today.
- listenallyall 4y ago
  There's no explanation there, just a declaration without evidence, or much thought. For example, someone still needs to deliver the keys, and the vehicle itself, of your online order. UPS might be able to deliver the keys, the car itself, probably not.
- benj111 4y ago
  Ok, if they aren't useful, the market can decide that. If the market can't decide because of laws in place then the blame should more properly be placed on the laws. Personally I would say car companies are manufacturers. They should concentrate on manufacturing and let the dealerships concentrate on the customer, so I don't really accept the thesis that they're useless.
fallingknife 4y ago
That's not a middleman. A middleman buys and sells the exact same product. In this case, the steel mill buys ore from the mine, turns it into steel, and sells it to the car company. The "turns it into steel" part is what differentiates them from a middleman.

somat 4y ago

Here is a well researched youtube video on the subject. https://www.youtube.com/watch?v=meHYBhcpdvQ https://www.youtube.com/watch?v=meHYBhcpdvQ And on that subject. What may be the best channel on youtube, amazingly well researched, written, shot, presented... and it's a(incredulous tone) motorcycle channel?!

listenallyall 4y ago

They hold inventory. That's a massive benefit to both the consumer and the manufacturer. Even if you dismiss everything else they provide (which would be unwise), that itself is enough to justify their existence.

pvaldes 4y ago
Inventory. Good point. Brands use dealerships as captive clients of their new cars. Then they can claim that had "sell" X cars of this model yet, when in fact are pushing dealerships to buy a percentage of those cars as requisite to keep the brand image.
- listenallyall 4y ago
  Dealerships are businesses, and are free to sever their relationship with the manufacturer. The fact that very few actually do, is evidence that your argument has little merit. Many dealerships seek to increase their allotment of cars to sell.
  - pvaldes 4y ago
    Of course they are, everybody is free to do whatever it pleases to them, but this was not my point. In some cases is an allotment, is a borrow. In other not. The dealerships aren't borrowing cars from the maker, they are "forced" to buy those cars from the maker with their own money, and they resell the cars later to recover the money. Is called a "zero Km" car. The maker is selling the dealership X cars each year, and they are thousands of dealerships in each country, so the maker has thousands of sold cars guaranteed even before the car is the market. Official dealerships are lending money to the brands all the time.
    - listenallyall 4y ago
      > this was not my point Even after reading your second comment, I have no idea what your complaint is. Again, if it was so awful, the dealerships would abandon the manufacturer.

Sakos 4y ago

I'm confused by all the comments here. Why is everybody so focused on the cons of dealerships instead of the cons if manufacturers own and run all the dealerships and the potential consequences, or even why it was regulated to be this way in the first place.

ceejayoz 4y ago
Would you like to highlight some? Why was it regulated this way? I can't find a great explanation, and "because it makes a lot of money for locally powerful business owners" seems to be the most common explanation floated.
- Sakos 4y ago
  I'm not familiar enough with the topic to be able to contribute meaningfully. It feels like most people here aren't, it's mostly anecdata with a tinge of libertarianism. At most I can say I'm vaguely aware that early in US history there were a lot of issues around monopolies/oligopolies (see company towns) that lead to antitrust laws and by extension laws regarding dealerships. But I'd have to do more research to be able to say anything more concrete.
mdorazio 4y ago
I've worked for several OEMs and have talked to dealers about this a bit. Here's a quick run-down. No domestic OEM sprang into existence with billions of dollars in the bank to spin up a nationwide network of showrooms and repair centers. As they were growing production slowly, they had to rely on small businesses around the country to sell their products for them, which also significantly improved capital when they were growing (dealers bought from the OEM, then sold to customers, potentially thousands of miles away from factories). Over time, these businesses became franchised by the OEMs to allow them to exert some control over the customer experience, standardize parts and repair work, etc. So that's why dealers became a thing in the first place. The tricky bit of the history is why the state laws in favor of dealers came into existence. It's very fuzzy, but in effect the Detroit "big three" became very large and powerful, with enough money to start stepping in with company-owned dealerships. The local franchised dealers, who by that time had also become quite embedded in communities and politics, thought that this was unfair since the OEMs could undercut local dealers on price, thus they lobbied their states to put in place anti-competition laws. And they were successful. That's about it. As far as I've ever been able to tell, customer experience and monopoly prevention never really factored into it other than as dubious arguments by the dealers themselves. Now here we are ~70 years later and the market has changed significantly, but the protection laws are still there. Fwiw, dealer margins vary by vehicle and brand, but 5-10% for mass market vehicles is common. That's money the OEMs would rather not pay out to third parties. Dealers also have massive markups on service and love warranty work because they can rake OEMs over the coals with it. The best argument I've seen in favor of dealers is that an OEM-run dealership would be incentivized to some degree to dismiss warranty work as unnecessary, while a franchised dealer tries to find every warranty hour they possibly can. That's about it, though - there's so much brand and 3rd party competition in the market these days that other arguments usually don't make much sense.