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.

Comments

Let the Public Decide

[Jodka]

from the ./ headline:

Are Car Dealers a Business Worth Keeping?

Remove the prohibitions on direct sales from manufacturers to the public. If the dealers survive, they are worth keeping. If the dealers fail, they were not.

Re:Let the Public Decide

[Anubis IV]

You've suggested there's a dilemma where one does not exist, since a dealership going out of business has little to do with jobs or income for the vast, vast majority of people. If the dealership was filling an actual void in the community, such as being the only place you could buy, sell, or repair certain makes and models, those needs don't disappear with the dealership, so other businesses will step in or will expand on their existing business. The jobs don't go away, and while some of the income may be going to a multinational instead of the wealthiest few guys in the state, 99% of us won't be affected by that change.

Moreover, dealerships already employ most of their people with repairs and other added-value, post-sale items. Those won't go away even if dealerships lose their government-granted monopoly on car sales in certain states. The jobs that are most likely to go away are car salesman, to which my response is, "and nothing of value was lost". I don't buy this whole "woe is me" line that the dealerships are pushing, and neither should you.

And if a dealership wasn't filling a void in the community by offering those added-value services, then, frankly, they deserve to go out of business for losing their way, refusing to keep up with the times, and failing to remain competitive. Governments shouldn't be propping up useless businesses. The point of having businesses is not to have jobs, but is rather to do something productive and useful. If the sole purpose of a business is to employ people, then it's already a lost cause.

Price tags are the greatest innovation of retail

[Anonymous Coward]

Look at the places where people still haggle over crap like a bag of rice or a pair of pants. Their economies are always underdeveloped with a low standard of living. Moreover, look at the most successful retailers: Walmart, Amazon, Target, that Swedish furniture chain, etc. They all have posted prices. They dominate global retail. If haggling was efficient and productive then some Egyptian or Bangladeshi retail chains would dominate global retail. This is not the case. The price tag was one of the most important innovations of capitalism. So why the fuck do we still by cars like some old lady in a 3rd world market haggling over some melons?

Re:they serve a purpose

[HornWumpus]

The dealers already pay Chevy it's price. The only wiggle room you get is on the dealers profit.

Chevy competes with Ford much better then Joe's Chevy competes with Fred's Chevy.

And then you get the 5 state regions where all Honda/Accura dealers are owned by the same corporation.

Stealerships might have been needed when there were 3 car companies worth considering.

I love beating the dealers to pieces

[JustAnotherOldGuy]

Lol, I love beating the dealers to pieces. I game the hell out of them and they can't do a thing about it. Here's what I do.....

I start with the best advertised car price and call each dealer near me.

I say, "Here's our best price so far, can you meet it? No, we're not coming in. Just email me your best price and if it's good then we'll come in." I told them exactly what model so the quotes would all be for the exact same vehicle. I also emailed several of them competing quotes from other dealers.

So I did this several times, getting lower and lower quotes each time. :) They complained bitterly about my doing this, but they beat each other senseless trying to shave another hundred or so off the last set of quotes.

They would say, "Well if I give you a price then you'll just go to another dealer and they'll give you a lower quote, wah wah wah".

And I said, "Damn right I will, wouldn't you? I'm just doing my due diligence trying to get a fair price quote. If you don't want to get this sale, don't give me a quote, it's not a problem."

"Wah wah wah" went the dealers. "This is unfair", "You're just taking advantage of us!", "Wah wah wah", and so on. lol

But they kept giving us lower and lower quotes. So fug 'em. It's not like I was putting a gun to their heads. :)

Then I found out something interesting. The dealer physically closest to you is under A LOT of pressure from the car company to sell the car to you, it has to do with their service area and their local sales market. Apparently they get big brownie points for making sales close to their dealership, and they get frowned on if they lose a sale to another dealer farther away. But a dealer farther away will quite happily sell you a car no matter where you live. Hmmmm, let me think about that.... Muwahahahaha. :)

So once they'd beat each other down pretty close to what they claimed was the "lowest price" they could offer, I spoke to the closest dealer to me (Dealer "A") and told them that Dealer "X' (about 25 miles away) had made me a really good offer, so I was probably going to buy from Dealer "X' , and I was just letting Dealer "A" know to be polite. Cuz I'm a polite guy, you know? That's what makes me so fucking loveable.

Whoah baby. I was getting a pretty good discount before, but now, as they say, "shit got real". And Dealer "A" dropped the price considerably and threw in a bunch of extra crap and offered to name their first-born child after me. I told them, "Well, I gotta tell Dealer "X" that I'll probably go with you guys then".

"Oh noes, don't call them!! They'll just offer you a better deal, err, I mean..."

So to make a long story short, I went through this "closest/farther" cycle a few times, and the prices kept getting lower and lower. And I hadn't even left the house yet, this was all by phone and email . :)

We did finally end up going with the dealer closest to us, and although I'm sure they made money on the car, they didn't make nearly as much as they would have liked to. We saved over $5000 from the original "best price". I've tried not to cry myself to sleep over this.

Re:I love beating the dealers to pieces

[swb]

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.

Waste of my time

[sjbe]

Lol, I love beating the dealers to pieces. I game the hell out of them and they can't do a thing about it.

Some people do enjoy the negotiation. Most Americans very much do not and I am one of them. And frankly for most people, car dealers are better negotiators. They do it all day every day and they are well practiced. Plus it frankly is a huge time sink and an annoying one at that. I've negotiated plenty of car buys but the experience is never painless or fun.

And honestly no matter what price you get from a dealer, there is a markup involved. They aren't selling it to you at a loss. I would rather deal directly with the manufacturer and I'd even be ok with splitting the dealer markup between us. Both the manufacturer and I would be better off. Dealers cannot go away soon enough in my opinion.

Re:they serve a purpose

[tburkhol]

if chevy sells a car to a dealer for $16000 and the dealer after haggling and whatnot sell the car to me for $17600 then the dealer made their 10% profit. Cut out the dealer and buy from the manufacturer and they will just sell me the car direct for $17600. It is foolish to think anything else would happen.

The dealership sold you a car for $17,600, but they sold the same car (in red) to your neighbor for $16,900 and to my brother-in-law for $18,200. The dealership can spend three hours haggling to figure out just exactly how much each customer is willing to pay. In fact, they have to, because haggling is their entire profit margin.

Direct manufacturer sales will make plenty of profit without haggling. They're likely to be more interested that each customer feels fairly treated during the purchase, and a couple hundred dollars one way or the other just doesn't matter. If a customer thinks Joe's Chevy cheated them, they'll go to John's Chevy for the next purchase. If they think Chevy cheated, they'll be going to Ford.

Point is: if you take out a middleman tax, the seller gets more money, the buyer pays less money, and everyone's happy except the middleman. Sales taxes are still paid locally, property taxes are still paid locally, staff are still hired locally, so most of the 'local' money is going to stay local.