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Are Car Dealers a Business Worth Keeping? (vox.com)
schwit1 writes: An opinion piece at Vox argues that "car dealers are awful," and the efforts to protect them against direct sales from Tesla and other manufacturers are misguided. "Buying a car involves going from dealer to dealer, each of whom has his own inventory. One guy only has blue paint. The other guy doesn't have the blue paint, and also only has dark gray seats. And each has his own fake sticker prices and complicated cash-back offers. It's no wonder 83 percent consumers say they would rather skip the haggling, and a third of people say doing taxes is less annoying than working with a car dealer.
But it's not just the hassle. State bans on direct sales turn out to cost consumers an enormous amount of cash. It's an enormous problem, and it warrants a federal solution. Cars are the most expensive consumer product that the typical consumer buys. And while it may seem obvious that cars are expensive due to the material and labor required to build them, the logistics of distributing cars is actually a very expensive part of the process. Research by Eric Marti, Garth Saloner, and Michael Spence has concluded that as much as 30 percent of the cost of a car is the cost of distribution.
But it's not just the hassle. State bans on direct sales turn out to cost consumers an enormous amount of cash. It's an enormous problem, and it warrants a federal solution. Cars are the most expensive consumer product that the typical consumer buys. And while it may seem obvious that cars are expensive due to the material and labor required to build them, the logistics of distributing cars is actually a very expensive part of the process. Research by Eric Marti, Garth Saloner, and Michael Spence has concluded that as much as 30 percent of the cost of a car is the cost of distribution.
most cars sold are sold by dealerships owned by large chains that span counties or states. you might call them regional businesses, but very few of them are small enough to be considered local.
There would still be factory-authorized service stations. They ride on the dealership concept today, but are essentially a separate business responsible for their own profit. No reason to think that half of the business would fail, since they have a captive market.
I think you're overstating the impact. It would still be in the best interest of the manufacturers to maintain the service contracts that they have with dealerships so that they wouldn't have to micromanage repair centers in every city but they could still maintain their QoS. The dealerships themselves would still maintain their hold on the second hand car market for similar logistic reasons, why micromanage a hundred tiny shops for this one thing AND compete with a hundred established entities to provide a service that you're really not that interested in? You also have the leasing market, which could in theory be picked up by the manufacturers, but I suspect that the dealerships will maintain this one as well. Even if you don't have to chase down a delinquent client, which manufacturers may have to start doing anyway, you're still left with a used car at the end of the lease transaction. Then there is the discount that will naturally be provided to the few car dealerships large enough to buy in bulk. So in the end the car dealerships may lose most of the volume from one revenue stream, but the ones that are diverse enough to begin with won't fold because of this shift.
I like to beatup dealers too.
But I don't buy new cars. Ever.
If you want a basic transportation special from a dealer, you just have to wait until the empty car hauler shows up. Than go look in their back lot. They will have a dozen or so used cars ready to go to the auction, with a minimum bid in the window. Know that the auction house charges a % and the hauler charges a flat fee. So find the transportation special that's acceptable, read the minimum bid. Go inside, don't talk to any salespeople, (don't acknowledge them or they get commish) offer the sales manager $50 (or $5) more than the minimum bid and don't budge. When he tries to get more, point out how much it will cost him once car is loaded. Say 'tick tock'. They will call you names, say you are starving their kids, Fuck em.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
I DESPISE haggling. I won't do it under any circumstances. I find it to be a major waste of time and energy.
When I give someone a price that is the price and it is not open to negotiation. If I see a price and I think it is fair I will pay it, if not I will go somewhere else and that is the end of it.
If there is somewhere that only does haggling I would just not go there ever. If there is an item that can only be bought with haggling I will just not buy it or pay someone else to do it.
Computer modeling for biotech drug manufacturing is HARD!
#3-7 are pretty much lumped together, but here you go:
#1. The service center
#2. Car leases (dealers LOVE leases, very profitable for them. May even beat out the service center soon.)
#3. Added junk (underspray, fabric protection, accessories, etc)
#4. An extended warranty that you can never use
#5. Financing (How much per month were you looking at...)
#6. Handling/Processing
#7. Kickback from manufacturer
Then about last on the list:
#8. Price of the car / markup
Having lived in the US previously, I much prefer the Norwegian (and most of the EU) model where you go online or to a dealer and figure out exactly which car you want:
Engine, paint, transmission, seats etc, then you haggle a bit about the price and order it, with delivery a number of weeks later.
In the US it seemed dealers really needed to be able to deliver a car TODAY, not tomorrow or next week.
Personally I ordered a Tesla 4WD model a few days ago, for delivery in the beginning of March.
The main difference from my last car was in the fixed sticker price: No haggling about rebates, just a simple take it or leave it offer.
The main reason for getting a Tesla here in Norway is of course our incredibly high import duties and taxes on regular cars (a car with a V8 engine would probably cost 2.5 to 3 times as much as in the US), while a Tesla has no import duties, no sales tax, no road fees and lots of free parking & charging. In a couple of years they have stated that the relative subsidies for zero emission vehicles will get a cap, so only smaller cars will be able to take full advantage.
Terje
"almost all programming can be viewed as an exercise in caching"
Opposite experience here. I've found dealership service to be much more reliable than independent garages. Around here, pretty much all the independent garages are swindlers and assholes. I wouldn't trust them to change my oil. I'd probably get the car back with a coolant hose that's been punctured.
After I spent about $800 trying to get my last car to run again, I gave up on show shysters. "This is what's wrong, it'll be $300." $300 later: "Whoops, we ran some more tests, and this is what's wrong, it'll be $200." $500 later: "That didn't fix it either, but this time we've got it figured out. It'll be $300." $800 later: "Whoopsie! This time we're really, really, really sure, but it will be $600." Me: "Never mind. I'll just have it towed to the junk yard."
None of that nonsense from the dealer. I suppose it's different in different towns. Not that I'm saying I car for the sales half of the dealership, but I'd hate for the service department to disappear.
My wife and I have used a gimmick where we go into the dealership together and I do all the talking with the salesdroid and she only acts minimally interested in the process, like the car is for me and she's just along for the experience.
Once we've sorted out what we want to buy and have some kind of researched invoice price, we switch roles. I quit saying anything at all and she starts negotiating with the salesdroid.
It really fucks with their head and they don't negotiate well. My wife is kind of an ass-kicker in negotiations to begin with and this gives her a huge psychological advantage. One guy kept trying to talk to me and she got pissed at him and yelled at him for not talking with the person she was actually negotiating with.
Deals make their money from used cars. Always have, always will.
New car sales profit: $1000 over invoice at a 'no-haggle' (which is about the average paid when haggling).
If you are *really* good you can work it down to oh say $600 or $700 if they dealership is really hurting for sales.
You are *always* getting screwed on your trade-in, *always*. ... so YMMV.
Advice: never bring a car to trade it. But then it's a colossal PITA to do a private party car sale
Manufacturer makes the money on a lease .. they are doing the financing through their wholly owned subsidiary.
If you by-pass the new car dealerships you still have the used car dealerships so I don't see it as much of a win.