The U.S. auto dealer model isn't going away anytime soon. Here’s why.

"As Du Volant" (skuhnphoto) 01/28/2015 at 14:43 • Filed to: car buying, dealerships, stealerships

31

100

Disclosure: I've been working in the car business for over seven years now, though I'm not in sales anymore. I've learned a lot about how the auto business operates during that time. This article isn't intended to glorify car dealerships. It's to explain why today's auto industry can't just up and change to a manufacturer-owned business.

Here's something the Internet loves to complain about: Car dealerships, especially when the topic at hand is either Tesla or "stealerships." Scroll to the comments section of any of these articles and it'll be full of discussion about how horrible all the current dealerships are, how they should all be closed in favor of a Tesla-esque factory direct model, and how all dealership owners should be fed to wolves. And there's some validity to these comments. There are a lot of truly awful dealerships out there and I agree that shady business practices shouldn't be allowed in this day and age. There are also a lot of really good ones though, but complaints travel much faster than accolades so you don't hear as much about them.

By the way, the comments section is down there  if you'd like to stop reading this article and go tell us all how much you hate car dealerships.

Anyway, I digress. The subject of this post is the Internet's demand for franchised dealerships to shut down in favor of a factory direct business plan and why it's not going to happen anytime soon. The reason, of course, is because the auto dealer lobby is comprised of an army of very rich men who are closely intertwined with quite a few politicians. They'll tell you how we all need dealerships because they serve their community, rescuing lost kittens and fighting crime while handing out lukewarm coffee and stale donuts, which is all a load of bullshit of course. The real answer is money- the automakers' money, specifically.

Pictured above: Car dealers at work, according to their lobbyists.

Let's take a look at how cars are sold. The American market is !!!error: Indecipherable SUB-paragraph formatting!!! . In other countries, dealerships typically keep a few demo models of their cars for people to test drive as well as some pieces of stock inventory for those who need a car right away. A large portion of car buyers there factory order a car to their exact specifications and wait for it to arrive. That's similar to Tesla's model- visit the showroom, check out the demo car, place an order if you're interested.

Not so for mainstream brands in America. With our booming postwar economy and love affair with the automobile our vehicle market grew BIG. Now, following multiple fuel crises and recessions and automaker bankruptcies, the average car dealership in the USA is a sprawling lot filled to the brim with cars, a huge selection ready to go home with some happy buyer right now . All the manufacturer marketing supports this, too. Dozens in stock at your local dealership. Drive one home today . America is a land of plentiful goods and immediate gratification. Our car shoppers (except for customers of specialty brands… think high-end luxury/sports cars and Tesla) want their cars now , and they want a large selection to choose from to find the perfect one.

There's so many cars at this dealership, she stumbled and fell into one while waiting to get her key fob battery replaced.

"Okay, so our market model requires large inventories. Why not just keep things the same, but change all the dealerships to manufacturer ownership?"

Fair enough point, but here's the problem: all these cars cost money, and lots of it. Each franchised dealership pays for its inventory. An average-sized dealership keeps between five and ten MILLION dollars' worth of inventory on its lot at all times, and some of the really big players can have $50 million or more worth of metal on their lot. The cars are usually financed but that's still a hell of a lot of money. The brand I used to sell has approximately 2500 dealerships in the US, which means in order to keep up the sales network they currently have they'd need to keep between $12 and $25 BILLION worth of inventory on the ground. Even if they cut the amount of stores in half that's still a HUGE amount of spending.

That's a big gamble and a risk the automakers don't want to take. They'd much rather have that money split up among hundreds to thousands of privately-owned businesses- that way if the market takes a dive it's the dealers' problem to move the metal. It's a similar story for cars that are tough to sell. There's an old saying in the car business, "There's an ass for every seat," meaning if the car is for sale long enough and cheap enough someone eventually will buy it. The dealership I'm currently working for has about 20 previous model year cars in stock that haven't sold yet for various reasons, and we'll probably take a loss on them. It's an inconvenience but nothing the business can't overcome… but if these cars were all manufacturer-owned that'd be over $60 million worth of old inventory gathering dust nationwide, and that'd be big problem for one company to bear.

And that's just new car sales. There's also the matter of used cars, service, parts, and body shops. Regardless of which segment of the business you look at, it's much less risky for the automakers to simply oversee it versus getting directly involved in it. That's why the privately-owned franchised dealerships will be here for many years to come.

Tesla's factory-direct model is definitely making waves though, and it's probably going to change the industry. I foresee the automakers becoming more involved in dealer operations and working toward a homogeneous experience at all dealerships. I'd anticipate them doing this with more frequent audits, tighter policies, and more rules laid out in their dealer franchise agreements (I could write a very long, very boring article about rules in franchise agreements- but I won't). They've already taken steps toward this, as many of the old-school dealership shenanigans aren't allowed anymore and the franchise rules for display and marketing are tighter than ever. However, the prevailing attitude is still "We don't care how you do it, just sell cars." As the market evolves I see this philosophy changing. The manufacturers who prioritize good customer experiences at their brands' dealerships are going to be the winners in the coming decades.

Here's how consumers can spur change in the industry: vote with your wallets. If a dealership rubs you the wrong way, don't do business with them. If they treat you well, keep going there and tell your friends and family to shop there as well. Don't say to yourself "Well, they're all crappy; I guess I'll just suck it up and buy from Shady McSleazeball over here." Settling for a bad experience is what keeps the sleazy guys in business. Seek out a good dealership- I assure you they exist.

Takuro Spirit > As Du Volant 01/28/2015 at 14:49

20

I've worked in the back end of a dealership for 15 years.

So I'm not even going to read all of that.

But I am ready to be done with it, and have the manufacturer sell direct. This is a shitty job in a shitty world and it's only gotten shittier.

I'd gladly work for a company like Tesla that sells you the car with no salesman pressure, and whisks it away to be repaired when it breaks.

As Du Volant > Takuro Spirit 01/28/2015 at 14:55

0

While I wasn't going to outright use the word "shitty" I do agree with your sentiment. What I was trying to get at here is that our market and buying habits are going to have to make a huge change for the automakers to want to step in and run things.

Cé hé sin > As Du Volant 01/28/2015 at 14:56

0

How does Tesla's no-dealer idea work with trade ins? I suppose the first wave of Tesla buyers are wealthy enough that they buy their Tesla as an addition to their existing car(s)but what happens when they want to sell cheaper cars, bought as an only car, or when the early adopters want to buy their second Tesla? At some point these non-dealers are going to have to do something with their customer's existing cars, whether they off load them in the trade or retail them.

As Du Volant > Cé hé sin 01/28/2015 at 15:00

0

I'm not sure, but there's plenty of car buying services out there in this day and age. I'm sure they could partner up with one of them to offload their inventory if they didn't want to get into the used car business.

Takuro Spirit > As Du Volant 01/28/2015 at 15:04

11

I think the general public would LOVE to buy online and pay retail price (where's that Sunday paper coupon???) for their cars, but the manufacturer would still have to have ties in how they are repaired and what parts are used, especially under warranty.... and a LOT of rich dealer owners are going to lobby against it so they don't have to give up their yachts and private jets.

nermal > As Du Volant 01/28/2015 at 15:05

5

What would it take to set up a completely virtual dealership?

No inventory. No salesmen. No negotiations. Just a website that you go to, build your car through a configurator, and place an order. Once the order is received, it goes to the manufacturer and your car gets built.

The entire transaction is done online. Your car gets shipped directly to your doorstep, and away you go.

The only overhead would be the cost of the website and coding, as well as extra shipping, otherwise it would be substantially cheaper than operating a "traditional" dealership.

Hmmm.....

As Du Volant > nermal 01/28/2015 at 15:12

12

The problem is that there's a lot more to car buying than just choosing a model, even for us enthusiasts who generally know what we want. Imagine spending $30,000 on a car only to find that the seat hurts your back or that your wife can't find a seating position that both allows her to reach the pedals and doesn't jam the steering column into her legs, which is exactly what happened when my girlfriend tried to drive my old Impreza.

I learned in my selling days that many car buyers are even less sure of what will actually suit their needs. I've lost count how many times I've run into people who were absolutely certain they knew what car they were going to buy, only to find out something didn't jive for them when they tried it out in person. The most common one is assuming a 3-row seat crossover will have room for both their kids and their stuff.

Galileo Humpkins (aka MC Clap Yo Handz) > As Du Volant 01/28/2015 at 15:12

1

I'm fairly certain, 100%, that I want this Z.

As Du Volant > Takuro Spirit 01/28/2015 at 15:16

4

That part about the dealer owners is definitely true.

Buying online is kind of a mixed bag. Lots of people say they'd like to do it, but I think when it comes down to brass tacks the majority of consumers just aren't comfortable with dropping thousands of dollars on an item they haven't seen in person.

The company I work for actually has the capability to sell cars online, and it's posted on our website. Customers can make a deposit with Paypal, apply for financing online, send their documents via scanner, and set up delivery arrangements. In the eight months since we went live with it we've had one customer use it.

Textured Soy Protein > As Du Volant 01/28/2015 at 15:16

55

The problem with franchised car dealers isn't that they exist, it's how they operate.

1. Negotiating. Car buyers have an expectation of needing to negotiate in order to get the best price on a car. Negotiating doesn't need to go away. But care dealers are often not good-faith negotiators. They combine all the separate numbers that should be negotiated individually (sale price of new vehicle, trade value of old vehicle, etc) into one and then tries to get the customer to pick a number. Hell, I spent a summer selling cars and that's exactly how the dealer I worked at did things too. My response to this BS when I buy a car is to break out the scratch paper and calculator, and list everything separately.

2. Predatory lending. Car dealers want to sell cars, and they want to write loans to people to buy those cars. They make arguably more money on the loans than on the cars. But dealers will do whatever they can to try and get someone into a car regardless of whether that makes financial sense for the customer. Just the other day I had a student come to me who has bad credit and a terrible 20.9% interest rate on a POS '06 Chevy Monte Carlo he got at evil, evil J.D. Byrider and wants to get out of. He went to a Chevy dealer who showed him a $40k Silverado, "but with all the rebates on this, we can get you out of that bad loan!" He came to me looking for advice on what to do. Here's what I wrote out for him:

This is a guy who makes 12 bucks an hour and has a credit score under 600. Yet the dealer was telling him (without taking a credit application) that he'd magically get approved for 6.9% for 72 months on a $40,000 loan with almost $10k of built-in negative equity .

3. Pushing a bunch of shit that no consumer needs or will get value from, and then encouraging these things to be rolled into the loan on the vehicle, thus creating more negative equity. Typically when you get to the finance manager's office at a car dealer, not only is it time to haggle over interest rates, but to tell them you don't want a bunch of BS extended warranties, maintenance plans, gap insurance, window tinting, paint protection, and aftermarket accessories sold at a large markup. When I leased my 135is, the finance manager wouldn't shut up about window tinting, extra years of BMW Assist concierge services, and satellite radio. He tried to get me to sign up for 4 years of concierge services on a 3-year lease! All of these things can probably be done cheaper if you go outside of the dealer, and then you're not tying them up in the giant loan you're already taking out to buy the damn thing in the first place.

All these things are self-perpetuating. A consumer gets a shitty loan on a car they can't afford and has a bunch of other instant negative equity rolled into the loan, then in a few years when they try to get out of that bad deal, the next dealer comes along and tries to "help" them with more evil shit.

Now, it's not impossible to avoid all these bad business practices by dealers. I've done it several times when buying cars. But it would be oh so much better if there weren't so much strategy needed to just buy a damn car.

Textured Soy Protein > Cé hé sin 01/28/2015 at 15:20

7

Tesla dealers don't take trades. It's one of the hassles of buying a Tesla.

Then again, if you can afford an $80k+ Tesla, you can probably afford to hang on to your old vehicle for a while until it sells. Or just take it to CarMax.

As Du Volant > Textured Soy Protein 01/28/2015 at 15:22

16

All valid points, which is why I encourage anyone who has a great dealer experience, even if it's with a competitor, to tell everyone they know.

As consumers, here's how we all operate, be it a dealership or a hotel or a restaurant. It's just human nature...

Bad experience: We make it a point to tell EVERYONE who will listen how terrible it was.

Good experience: We think to ourselves "That was nice" and then continue on our way.

By making sure we encourage others to do business with the good guys we make the consumer landscape better for everyone.

Tom McParland > As Du Volant 01/28/2015 at 15:30

4

Nicely done...the industry is changing there are way more good dealers than there were 10 years ago.

Textured Soy Protein > As Du Volant 01/28/2015 at 15:35

3

I've had a dealer turn a bad situation into a good one, and posted about it here . "Telling everyone," in a way.

Even with them doing the right thing in that situation, they still had done the same old rolling all numbers into one and trying to sell me a bunch of gap coverage and other add-ons when I bought the thing. They even had a handy-dandy video the finance manager showed me in her office with the owner of the dealer saying "and now your finance manager is going to talk about all of our wonderful value-added* services with you!"

* = value added to the dealership's bottom line

Like I said, I consider myself very successful in dealing with dealers, but every single time I've bought a car it's the same rigmarole. All the dealers use the same tactics.

BaconSandwich is tasty. > Tom McParland 01/28/2015 at 15:38

1

Given that there are still bad dealerships out there, we still have room to improve.

Fleetwood T. Brougham > As Du Volant 01/28/2015 at 15:50

7

I could not care less if the rest of the industry switches. It's an economic decision they have to make. I DO care that their bloated graft-filled army of lobbyists has the ability to keep another carmaker from employing the direct-to-consumer model if that's their decision. That's the real argument here; the rest is a bit of a straw man.

PuristDriver > As Du Volant 01/28/2015 at 15:52

0

We don't have to do away with privately owned dealerships. All we're asking is for is to be able to buy direct from manufacturer as another choice. If dealerships want to stick afterwards, that's fine too, but this is all about giving consumers more good choices and better ways to purchase their car (online if they choose for example).

StevenG > As Du Volant 01/28/2015 at 15:52

2

All this inventory and yet no one I know has ever been able to find exactly the car they wanted. Either they have to take options they did not want, or settle on an automatic, or take the car in a color they did not like.

Pending Approval > Takuro Spirit 01/28/2015 at 15:53

3

How much blow do you recon you've done in those 15 years?

Jerk Dently > As Du Volant 01/28/2015 at 15:53

0

I understand the business behind dealerships and having large inventory on hand. But, I also think the decades of this is what contributes to the fairly boring and homogeneous auto culture we have in the US. Sedans and SUVS everywhere.

AntiLag > As Du Volant 01/28/2015 at 15:54

1

The problem with most car dealerships is the same problem with most dentist offices; they're not interested in doing the right thing, in any situation, if it means a lost opportunity to make money. That is what they are instructed to do, by someone who doesn't have to see all the innocent people being taken advantage of. You can't live without your teeth, and don't intend to without a car, so prepare to be fucked over. Just like medicine, gas, shaver blades, and many other things we need, we get charged way too much because there's nothing we're going to do about it.

philsphan09 > As Du Volant 01/28/2015 at 15:56

0

As much as the issue is at the dealership, I still think the large auto companies are still at fault. For instance, Tesla takes so much more responsibility for repairs then the large manufactures do. The dealerships know what the manufacturers will reimburse them / support them with, and I don't think it's as good as a company like Tesla.

Example being when a dealership has destroys your car / causes issues. From all the articles on this site alone the Auto company immediately pushes back, whereas Tesla is much more accommodating.

In short, I don't think the dealership model is necessary broken. I think the auto companies need to change some of their policies / procedures on the back side.

godblessE39 > As Du Volant 01/28/2015 at 15:58

0

I'm not necessarily against privately-owned dealerships. It's the monolith owned, AutoNation-type dealerships. That maybe hardcore capitalism at it's worst.

facw > StevenG 01/28/2015 at 15:58

6

Right, they've got lots of inventory, but because they don't want to be stuck with any weird cars on their lot that won't sell quickly, they end ordering mostly the same set of bland packages. They have quantity, but not variety.

450X_FTW > As Du Volant 01/28/2015 at 15:59

6

When people complain about how Tesla sells their cars directly to the customer, I remind them of what life would be like if all companies were forced to operate like a dealership does. Do you like that micro brew? Well guess what you can't buy that beer from the brewery anymore, you have to buy it at another bar or from a party store. Want to spec out your computer from Dell? Can't, have to buy what is available from Best Buy.

solidjack > Textured Soy Protein 01/28/2015 at 15:59

1

This is true. They do not technically take trades but they do have a deal with AutoNation. We traded in our car and then paid tax on the difference same as a dealership would have.

Takuro Spirit > Pending Approval 01/28/2015 at 16:00

0

Knowingly? None.

StevenG > Cé hé sin 01/28/2015 at 16:00

0

Can't they just send all the cars to auction?

BiffMagnetude > As Du Volant 01/28/2015 at 16:01

0

I have had to go to war with every dealership I have dealt with to get what I viewed as a reasonable deal.

Now that that is out of the way:

What is the back story on the dusty pace car?

StevenG > As Du Volant 01/28/2015 at 16:01

3

You would still have a demo car like Telsa does. Once you know which one you want, then the configurator comes into play.

detailer4u > Textured Soy Protein 01/28/2015 at 16:04

3

I agree. I commented earlier on another post about honest, passionate sales. Unfortunately many dealers hire these aholes for sales managers, GM's, and business managers. They set the tone for the store, and if they are untalented jerks, that got promoted because the dealer could not get rid of the bastard, then they make life miserable for the staff the customers. Dealers need to hire leaders that are car guys and not a boss that can no longer sell and gets promoted because he / she is a kiss up. If some of these so called managers were leaders, and true car guys, they would have to lock the doors to keep applicants from flooding the dealership. I have seen far too many idiots put in positions of authority and create a mass exodus of the truly passionate talented people that report to them. I could go on for days on this one. Change the culture, and character, of the dealership, and everyone will benefit. It starts at the top. I know I made it really simple and it is not. I think anyone who has been in the business knows exactly what I mean.

MK6GTI-now with added Miata > As Du Volant 01/28/2015 at 16:04

7

As somebody looking to get into car sales, this is what I have ingrained in my head. I don't mind making a bit less per car and going the extra mile to make someone happy if it means a customer leaves smiling and potentially brings in more customers later on. At the end of the day it's better for everyone involved if the customer is happy, and I hate the thought of turning the second largest purchase many people make into an unpleasant experience. Maybe this attitude means I won't do well selling cars, but I'd like to think that it works that way.

I've been on the other side of buying a car a few times and had a shitty experience or two. The dealership I bought my GTI at was awful, so I made a point of going to a competing dealership for service. They've been fantastic and I've made a point of telling everyone I can.

T-REG > As Du Volant 01/28/2015 at 16:05

1

Good read,

Just shop online and always go through fleet and or internet manager. We just want to roll a unit if its a mini but a quick deal im cool with it.

Snooder87 > As Du Volant 01/28/2015 at 16:06

2

I think what you written highlights the difference between a mass market model for schlubs and a luxury sales model.

Honestly if Cadillac or Lincoln wants to eat the German's lunch, this is a way for them to do it. Bespoke autos. You don't just show up at the dealer and drive off with the car, it's "hand crafted just for you" at the factory according to your special order. Maybe even play up the patriotic angle with a little plaque somewhere on the dash signed by the "master inspector" who "certified" that specific vehicle. Never mind that it's shit off the assembly line like all the other ford's and chevys, that little touch of luxury elitism would go a long long way. Although I would call it bespoke. That's getting played out. Call it Coachbuilt.

The guy buying the cheapest possible used econo box doesn't give a fuck about his sales experience or if the salesman is nice. The guy dropping north of $50k does.

gregm > As Du Volant 01/28/2015 at 16:08

1

To reiterate, it's a huge buffer between the manufacturer and the customer. I used to work at a company that was in the resale and leasing of midrange computer equipment, IBM stuff, AS/400 and the like. The companies that do this sort of thing are VARs, value-added resellers. Now one way to look at this is that this is just another middle-man between you and your product, just adding points on top of very expensive equipment. And for the shitty ones, that's going to be true. Ideally, what the VAR does is actually do what the name says, add value. There's pre-sales consulting, installation, technical support, etc. They're going to be the first-line in figuring out what's going wrong with your equipment and second-tier technical support provided by the manufacturer will only be talking to the VAR's technicians, saving them a lot of time. If it's escalated to this point, it's probably a real problem.

It's great when it works right and awful when it doesn't. It's the old HOA problem. You live in a neighborhood without one, you are upset when your neighbors cut corners, houses start looking junky, everything is shit. You're like goddamn, why can't we force them to keep up standards? Like with some means of enforcement. So you get an HOA. Then you discover all the reasons why having an HOA sucks. Expensive, arbitrary, still poor at enforcement, and the costs always go up.

In any industry with a dealer model, there's always the temptation for the manufacturer to sell direct. After all, they're looking at the VAR's cutting into their profit margin. But it can be very difficult to do at a national level what smaller companies can do on a local level. There's both efficiencies and inefficiencies of scale and when comparing a family-owned burger joint with one location vs. McDonalds.

Meatcoma > As Du Volant 01/28/2015 at 16:08

0

Muranos as far as the eye can see.

Stiiles > Takuro Spirit 01/28/2015 at 16:09

0

The manufacturers pay for the warranty repairs, so they get to specify what parts are used in those repairs, and how much they're going to reimburse the dealer for. That's not going to change, no matter what the dealer model ends up looking like.

gregm > Textured Soy Protein 01/28/2015 at 16:11

0

Everything you said I'm agreeing with but the gap insurance. From my understanding, you are utterly hosed without it. Drive off the lot owing $20k, you crash the car and it's totaled, your insurance company's payout will certainly not be $20k and you will owe the difference. Are you saying that it would be better to self-insure for the gap than throw money at them?

As Du Volant > BiffMagnetude 01/28/2015 at 16:14

0

No idea, I did a Google image search for "new car barn find."

I just wanted a photo of a dusty car with a window sticker still attached.

Stiiles > StevenG 01/28/2015 at 16:15

1

They could, but why bother? Doing so would mean they'd have to low ball (and potentially alienate) their wealthy customers because auctions get you a wholesale price and you don't want to lose money on a deal, and then you need more real estate to park the trades out of sight and more employees to handle disposing of those trade in vehicles.

jks > As Du Volant 01/28/2015 at 16:16

0

The author acknowledges that the current dealership setup is propped up with the force of law; then argues that dealerships are the way they are because people want them that way. How many people would rather pocket the money that that expensive brick & mortar building costs? How many don't really need that salesman to help them make a buying decision and would rather pocket his commission? How many would rather pocket the money that the dealer pays (in interest and cleaning, etc.) to keep that car on the lot waiting for you when you decide to buy? I know I would much rather pocket a few thousand and have the truck drop my car off in the driveway, but I don't get to have that choice thanks to the force of law.

LifeIsStout > As Du Volant 01/28/2015 at 16:18

0

I would agree with having demo cars. Wife and I are in the market for a new vehicle (to us) and have driven the new GTI, BMW 335 and the Audi A4/S4. The GTi was fun, the BMWs were actually a disappointment, sat in both the standard and the sport seats and really did not like them. The GTI cloth seats were pretty nice, but the sweet spot were the Sport A4 seats or the S4 seats, super amazing and supportive. As a decently tall guy (6'1") having the extending bolster on the seat bottom was a revelation for longer distances, and it was included on the Audi's, still had to pay extra for that on the BMW. Probably going to go home with an S4 this weekend because of that.

jariten1781 > nermal 01/28/2015 at 16:18

0

A virtual dealership can't do warranty work. If that caught on it'd drive most of the smaller dealers out of business and everyone would be stuck driving significantly further for service (or the service model would have to change).

Future next gen S2000 owner > Galileo Humpkins (aka MC Clap Yo Handz) 01/28/2015 at 16:18

0

The grey coupe or the white droptop or the white coupe?

Goose > As Du Volant 01/28/2015 at 16:19

0

Do you think that is because everyone thinks you have to negotiate for a price with a dealer. I feel that most people probably shied away from that online thing because they don't know how to negotiate the price of the car online. If your dealership did have "this is the price, no negotiations, period;" I bet people still felt like that wasn't true because we all (most of us at least) have been told that you must negotiate with a dealer to get a fair price on a vehicle and if you don't, you are getting screwed. I bet the lack on online sales is because people don't trust dealers (in my opinion, for good reason 95% of the time), not that selling cars online doesn't work.

BuilderMan > As Du Volant 01/28/2015 at 16:19

1

It's outsourcing. The car makers want to concentrate on... MAKING CARS. The car dealerships want to concentrate on... DEALING cars. It makes pretty decent sense.

LionelEssrog > Textured Soy Protein 01/28/2015 at 16:19

2

That's why you should always get approved for a loan from your own bank before you step foot on the lot and don't bother with a trade in unless you absolutely have to.

GUYMANDUDE > As Du Volant 01/28/2015 at 16:20

0

what about dealer run "shawcasing" outlets, then online ordering. it would lower their overhead and help streamline manufacturing to a "made to order" method. then they could lower their manufacturing costs and inventory costs, raise the quality and lower the price "like in japan". maybe they could even stop overproducing shitty cars that nobody want then forcing dealerships to take them and sell them at a loss.

trade-ins would be sold at auction to used car dealerships, like they are already in some markets.

servicing could be done at the showcasing outlets, and outsourced to other "licensed" partners.

Future next gen S2000 owner > As Du Volant 01/28/2015 at 16:20

0

Fun Fact #1: I went into a caddy dealer to ask about the ATS, the polite salesmen said you can get the manual with all the engine options. LIES!!

I really want the coupe with the manual and the 3.6 motor, may have to settle for the 2.0 motor.

Stiiles > As Du Volant 01/28/2015 at 16:20

0

This. I'm an experienced professional in the field, and after a lot of research when I went to buy my Dodge diesel pickup I was sure I'd get the 6 speed manual, but after test driving both I realized that the stick had long throws and a lot of shifting was required in non-highway driving so I ended up buying the automatic instead. When shopping for my current car I drove the Sonic turbo, the regular Focus, the Fiesta, the Focus ST, and the Fit Sport and looked at the 500 turbo and the Mini cooper before buying the Fit.

JCAlan > As Du Volant 01/28/2015 at 16:22

5

You're wasting your time talking about this. The car business is the only one I know of where everyone thinks they know more about it than the people that do it for a living. It's the only profession where after you tell people what you do, THEY proceed to try to educate YOU on what you do. After seventeen years in the business doing everything from lot boy to GM, no one has ever said, "Wow that's interesting, tell me more about how the car business works!" They think they understand it, and they think they know all the ins and outs since they once spent a summer selling cars at Bob's Motors or because their cousin works at Jiffy Lube.

\rant

Galileo Humpkins (aka MC Clap Yo Handz) > Future next gen S2000 owner 01/28/2015 at 16:22

0

Grey Coupe

Textured Soy Protein > gregm 01/28/2015 at 16:22

1

Gap insurance is good but you can get it as part of your auto insurance policy rather than buying it up front when you get the car. Pre-paying up front isn't necessarily terrible if you don't roll it into the loan, but often people don't actually include the cost of a gap pre-pay in their down payment, which just creates more negative equity.

Fun fact: if you do pre-pay for gap at the dealer, and then sell (or trade) the vehicle before the end of the loan, you can go back to the dealer, tell them you got rid of the vehicle, and ask for a pro-rated refund of the gap pre-pay.

But it's probably best to just add it to your insurance policy rather than include it in the vehicle purchase.

Stiiles > StevenG 01/28/2015 at 16:23

0

I've always been able to find the exact combination I wanted, both for myself, family and clients. You just have to be willing to go further than your local dealership, or wait for it to be shipped or dealer transferred to you.

SOCdriver > As Du Volant 01/28/2015 at 16:24

0

Man my Z is still at port? Dude I have been waiting like hours for it.

asianstyle > Textured Soy Protein 01/28/2015 at 16:24

0

Yes, fully agree with all your points.

I've found that dealership sales people are usually pretty good or I've met plenty that I would not mind doing business again with. However, the finance managers are always shady shady crooks. Lumping numbers together to try to blur how much each individual part costs and going by monthly numbers saying its a dollar more a month. I don't give a shit I don't want it. Assholes all of them.

The finance managers are also always the bottle neck of every car purchase. I walk into the dealership knowing they have the car I want and we already negotiated on price. I still have to wait for hours for this fucktard to get his paper work together and whatever sales pitch hes going to try to sell me on.

As Du Volant > Stiiles 01/28/2015 at 16:25

0

Agreed on the Ram, that transmission takes a lot of effort. I always insist on buying manual transmissions but if I needed a diesel truck for some reason, I'd get an automatic. Driving a manual Cummins isn't fun... it's work.

Textured Soy Protein > detailer4u 01/28/2015 at 16:25

4

I look at it this way: dealers keep trying to sell bullshit like maintenance plans and paint protection, and acting like predatory lenders, because it makes them money. They figure if all the dealers are like that, they might as well do it too. Why stop if it's still making money, and people are still buying cars?

It's kind of the same basic reason why airlines keep offering worse service, charging more fees, and shrinking the sizes of their seats. Consumers hate it, but they're still going to fly when flying's their only option.

LionelEssrog > As Du Volant 01/28/2015 at 16:25

0

My family had a great relationship with a Chrysler dealer for 30 years (minivans and then lots of Jeeps) that had been in business for 2 going on 3 generations. Then the economy shit the bed in 2008 and they took his franchise, that his father had originally paid $450k for, and he ended up with nothing. The business model is terribly broken.

Takuro Spirit > Stiiles 01/28/2015 at 16:29

0

Yes but if they are in charge of the repair facility, they can mandate where they acquire technicians from, and the parts as well. Lots of people will out of jobs.

athought123 > StevenG 01/28/2015 at 16:29

0

The problem is logistics. When demand is high, you'd have to wait until the car is built. When the demand is low (winter) car companies will have to slow production and even cut people. Car manufacturing will turn into a seasonal job and will have an adverse impact on worker quality, which will, in turn, make the product quality worse.

Goofnik > As Du Volant 01/28/2015 at 16:30

0

The biggest issue with a good dealership experience is how much the experience can vary across salespeople. The crappiest dealers can have the world's best salesperson who still makes the experience very easy. And high-end brands can still have rank amateurs who simply get in your way and make the experience frustrating and teeth-grindingly difficult.

athought123 > 450X_FTW 01/28/2015 at 16:31

5

So you basically live in PA

450X_FTW > athought123 01/28/2015 at 16:33

1

Michigan, where direct auto sales are banned, but is that how it is in PA?

get-nick > As Du Volant 01/28/2015 at 16:33

0

How awesome would it be to have manufacturer owned, used car dealerships? The manufacturer could manage the warranty, repairs, and the pricing all at once. Imagine going to the Tesla dealer and being able to buy a haggle free used Tesla.

Cigarette Butt Plug > As Du Volant 01/28/2015 at 16:36

0

I bought a car yesterday. I called ahead asking them to prepare a quote before I came to look at a car. I didn't tell them I had a written quote from a dealer 15 miles away. I looked at the quote and saw a line saying additional accessories - $1568, on a car that had ZERO options above the trim level. The salesman said something about paint protection (It's called a clear coat), rust prevention (I'm in Arizona), and Window tint (fair enough). I pulled out my other quote and 3 minutes later my car is $1600 cheaper ($0.47 less than the competitor). I brought it down another $250 but I would have been much happier if that padding wasn't there in the first place.

athought123 > 450X_FTW 01/28/2015 at 16:38

2

PA alcohol laws. You can't buy beer at the groceries, you have to go to one of these "beer distributors". And they don't sell liquors. For those you have to go to the state liquor stores. I'm not entirely sure about buying a six pack from breweries, but i'm sure PA has some draconian law against it. Made my college days pretty awfully sober.

Vision090 > Textured Soy Protein 01/28/2015 at 16:38

0

wrong..Tesla does take trade ins

>Employee

nappingatdesk > As Du Volant 01/28/2015 at 16:40

0

I still hate dealers. I ordered a new car a month ago and the dealer still can't find one. They have to search the entire regional dealer network in hopes of finding one, then try to make a deal to get a hold of it. They have no idea if it will take another week or 4 months. It all depends if the other dealer wants to sell the car he has or hold on to it and make more money by selling it himself. If I truly want the car fast, I have to get on the phone myself and try and track one down. If I was dealing with a manufacturer directly, I would have a firm idea of when I would have my car. The present dealer network is a sham.

xx45xx > As Du Volant 01/28/2015 at 16:40

0

this face is strangely inappropriate for any scenario involving anything appropriate. this is a straight up orgasm face.

symbolsix > JCAlan 01/28/2015 at 16:43

8

You've clearly never been a teacher, a police, a waiter, etc. etc. etc.

Doctordumps > As Du Volant 01/28/2015 at 16:43

11

I'm fine with going to the dealer.... I look online, call, and find what I want. The key thing is Americans buy things spur of the moment. Most dealerships if you flat out walk in and say I will pay invoice minus rebates and you can have your $230-700 in hold back. They will just agree to get a easy deal they made a tad bit of money on the road. With online reviews and surveys directly from the manufacture affecting the kickbacks they get dealership now days are way more consumer friendly. It's just people don't do their research, have bad credit, neg equity, trade ins, ECT.... The dealerships are here to help you in this era, but believe me if a person comes in and they can make some money why not gotta keep the lights on.

Lightness, it's Important > 450X_FTW 01/28/2015 at 16:45

0

That's how Beer sales are in PA, though you can go directly to the brewery to get draft beer and the occasional single bottle.

Klaus Schmoll > As Du Volant 01/28/2015 at 16:45

1

I always find it interesting to read stuff on how American dealerships work. As you have pointed out out, Europe is a made-to-order market, whereas America is a market where manufacturers just dump cars on their dealers to deal with as they please (oversimplification I know, but still). Also the frenchise rules are a little different. For example, our local BMW dealer had to re-do their already up-scale looking showroom to comply with BMWs current brand identity. The idea is to create a McDonalds-like environment. You always get the same product, price, service, experience at every dealer and they all look the same. There also are no mark-ups on sought after models, or on the other end of the scale, leftover last year cars. This leaves much less room for BS but it also depends on a customer willing to wait for their car.

MonkeePuzzle > As Du Volant 01/28/2015 at 16:46

1

moar like "STEALERSHIPS!" ammaright!? who's with me?

KusabiSensei - Captain of the Toronto Maple Leafs > gregm 01/28/2015 at 16:47

0

Your auto insurance sometimes has options to cover that without buying a separate gap policy.

Nationwide does that for an extra amount per year for the first two years of ownership, which is when you would be most at risk of being underwater. After that, you don't need it, but they will pay for a car one model year newer if you keep on with the addendum on the policy.

Stiiles > Takuro Spirit 01/28/2015 at 16:47

0

Manufacturers usually require dealership technicians doing warranty repairs to be factory trained, and always require a minimum training level to be maintained in the service department to comply with their franchise agreement.

xx45xx > nermal 01/28/2015 at 16:49

0

uhm...doorsteps are bad places for car deliveries.

Takuro Spirit > Stiiles 01/28/2015 at 16:49

0

^ works for a dealer.

Once or twice as a tech.

I know.

But if we cut out the independent owners, and the manufacturers control who and what and where and when they hire, the average joe tech TODAY will be out a job. Especially if they consolidate their operations from 10+ dealers in a metro area to just one.

Just spit ballin' here....

ThePro > Galileo Humpkins (aka MC Clap Yo Handz) 01/28/2015 at 16:50

0

I see a G37S Sedan? <3

veloceracing > As Du Volant 01/28/2015 at 16:51

0

Let's stop pretending that the franchised dealer model vs factory owned store debate is solely about car sales. The service side gets often neglected in the discussion, and it's a shame because that is what triggers most of the visits to a dealer and makes the dealer the most money. It also costs the manufacturer the most money, and that money is recouped through car sales, part sales, and various fees they charge the dealer and customer.

How does service cost manufacturers the most money? Warranty. When your new car has a problem and you take it to the dealer to get fixed, the manufacturer is really footing that bill. They are buying the parts they just sold to the dealer at a higher rate than they sold them. They are then paying the dealer $100+ an hour flat rate for a tech who might make $20 an hour to fix the car.

When a dealer gets reimbursed by manufacturer parts are usually paid at cost plus a pretermined markup. Certain states require that parts be paid at what the dealer sells them for (often higher than MSRP). If manufacturers were able perform these repairs directly for the customers (like Tesla), they'd be saving 40+% of their yearly parts expenditure by just changing who installs the part in the car with no change in the amount of parts replaced under warranty.

Same goes for labor. If a manufacturer paid a technician flat rate at the BLS.gov average of $17.13 an hour vs reimbursing the dealer at $100, they are making serious savings. This leads to a cheaper car? How? Cost per vehicle.

When a vehicle is designed, produced and priced the manufacturer looks at how much that particular vehicle is going to potentially cost them (R&D, warranty, training, etc). They price the cars so they cover this predicted cost and still make a profit (unless it's a Phaeton). Their dealer body's labor rate and parts markups have an incredible effect on this number. As the dealers get paid more and more, the price per car goes up and up. When a manufacturer approachs a supplier to make parts for their new car they often include a responsibility on the supplier to reimburse the car manufacturer for any failed parts under warranty. Higher warranty rates and costs at the dealer level? Higher contract price at the supplier level. More expensive car in the showroom.

By cutting out all the middle men the manufacturer lowers the cost at every step. Lower warranty cost, lower supplier contract costs, lower cost per car, cheaper car in the showroom. This isn't even counting the reduction of redudancies in certain markets! The amount of money a manufacturer would save because of this would allow them to keep the same levels of inventory on the sales side they currently have now. If, that is, they wanted to.

As you can see the gap between manufacturer and end consumer is a profitable area for these dealers who aren't going to give it up easily. The sales side of the equation is relatively small potatoes when compared to the service side of the automotive business.

ThePro > Snooder87 01/28/2015 at 16:51

0

I care about the sales experience even if I buy a $1000 beater. If you treat me like crap, I'm not gonna give you a penny.

The local Chevy dealer can confirm this.

450X_FTW > athought123 01/28/2015 at 16:52

1

Wow that's shitty. That's exactly how Canada is too

Cap'n Jack Sparrow > Textured Soy Protein 01/28/2015 at 16:52

0

Or (GASP!) sell the thing yourself on Autotrader...........................................................................................

greenagain > As Du Volant 01/28/2015 at 16:57

0

Yeah, and the idea of no-pressure sounds good as long as EVERY dealer is doing it.
If only some of them do, the dealers with salespeople will sell more cars.

jimmy-buffett > As Du Volant 01/28/2015 at 16:57

0

Your local McDonald's is a franchise, your local Wal-Mart isn't. There are benefits to and problems with both models.

The difference with car dealerships is that they are the public face of your brand, and they are motivated to do business in ways that reflects negatively on the brand. Many consumers aren't informed enough to know when to blame a dealership or the manufacturer for a problem.

Going to the Wal-Mart model means fewer dealerships / less risk by the manufacturers, but a better overall experience for the customer. All the sales people become salaried employees and the ranking of priorities — getting a sale, customer satisfaction, customer service — shifts.

Ultimately this comes down to efficiency: dealers hate the Tesla model because they are a middle-man who extracts a part of the sale for a questionable value-add to the process. The dealership model is in