So many people don’t understand the economics of dealerships and why most manufacturers would not go to a D2C strategy. I would love if all manufacturers would do on time manufacturing like Toyota.
I think people forget auto manufacturers love the dealer system too.
Oems get free service centers and the dealer/service center becomes a free call center for them. They know almost all problems with the vehicle are going directly to the place it was sold rather than the manufacturer.
It's been 20 years since I worked for GM so my data is old, but I worked as a current vehicle engineer and had direct access to warranty claim data and worked with dealerships frequently.
No, we didn't love the dealer system. Customer brings a car in under warranty, they do a half-ass job of diagnostics and throw the parts bin at it, buy the repair parts from GM at cost and sell them back to GM at retail.
I'd get bins of warranty repair parts back and the amount of them with nothing wrong was insanely high. Nothing like throwing perfectly good Corvette wheels in the dumpster at Milford because a bunch of dealers warrantied curb rash.
Depends on which department at the manufacturer. Most hate the dealers since it introduces uncertainty to the process and the dealer is motivated to make as many claims as possible.
thats great, it should be up to the manufacturer to decide which path to go then. As it stands, you are forced to go with dealerships in the vast majority of the US.
They also do this with recalls. They bring their cars into their service stations for recalls about innocuous things like a screw in the passenger seat’s adjustment lever or something. Then while you’re waiting, BOOM- sales staff is on you like sharks.
Depending on your state they may not be allowed to have showrooms or sell directly to the customer (like in Texas) and may only be allowed to have service centers. You can buy a tesla online through their website but it's technically considered an out of state transaction. Once your order is complete your car gets delivered to your address of choice. No traditional dealership hassle.
getting rid of auto dealerships' exclusivity should be high on the list if the dems ever get the federal government back. those lobbying dollars go straight to the republicans so it would hurt their viability, plus everyone hates them so it's an easy win for voters
It will never work if you don't try.
I hope one day we can break the dealer lobby. Just look at the scale of the industry and how much wealth is being extracted to fund all of that. That's all excess cost paid by everyone, ontop of the car to fund it all. It's nuts.
My old business partner owned two dealerships and pulled in ~$20M/yr, for instance. There’s so much frickin money in owning dealerships (*when successful).
For 2 successful major metro dealers 20M sounds accurate for the owners actual income. I work at a middle of the pack Honda dealer in a major metro and we gross 300-450k in profit on sales per month. This doesn't include Service ( the real bread winner ) and parts/collision
Heh, I bought my wife a car, and the owner said to give me everything at cost. So I figured I’d get an extended warranty. I get a 7-year, bumper-to-bumper warranty, with no deductible. Guess how much…
$495. Something they’d typically charge $2,500 for. It’s a racket.
I remember reading the shareholder financial report of a dealership group once and they had something like a 88% gross margin on extended warranty products on average. The biggest volume dealers often used to sell cars at or below invoice to get volumes and made up for it this way pre 2020.
They must hate me then, my extended warranty paid $14,000+ to replace my transmission.
Well don’t blame me though blame ZF, they make terrible transmissions
Worry not, they probably made $14,000,000 off of people who bought it but never used it as well. It's like an all you can eat buffet, everyone pays the same price, almost everyone cost the buffet less than they paid. The anomalies are negligible at volumes this large.
$20M. Sometimes a lot higher. To be fair, this was SoCal and these were Toyota stores, so good market and good brand.
At one point one of the stores was selling 1,000+ cars a month, although the other rarely topped 100. The average gross between the actual sale + the F&I was about $3,500/unit. I know the Parts Depts also grossed around $500-$600k per month combined, although everyone’s pay came out of that, plus the department’s share of the rent, utilities, etc came out of that. I’m sure bottom line was still six-figures a month, and the Service Depts made significantly more than Parts.
There really is a LOT of money in owning a car dealership.
Sales averaged around $3,500 in gross per unit when factoring in F&I. Service was holding 77% GP, which has already had the technician’s pay removed, meaning out of that 77% you are only paying a little to the ASM, a tiny bit to the Service Director, and then odds and ends like the department’s share of the rent and utilities.
Parts even put six figures to the bottom line (between both stores) every month.
And I'm not against it as a model, we shouldn't ban them or anything. They're selling a service, and if people want that they should be allowed to do it.
The problem is that other people are legally prevented from competing against them (with direct to consumer sales). Having to go to fucking Tribal lands to get around the laws is nuts.
I read a study somewhere that said car dealership owners are one of the likeliest demographics to make up the base of the current administration's support, and one that's both wealthy and disproportionately active in using that wealth for lobbying. Dealerships probably have more political weight than the OEMs themselves. I'd rather bet on Oldsmobile coming back than bet on dealerships relenting.
I've always wondered how it will play out if people start buying direct from manufacturers. Would dealers improve service to remain in business? Would they even be able to cut prices enough to compete with the actual manufacturer? And if they go out of business en masse, will manufacturers start opening show rooms so people can test drive cars? What about service centers? Will we end up with the same system we have now but owned by the manufacturer instead of the dealers? I wonder how things will actually look if the current dealer model starts to go away.
I don't understand people's desire to have their money funnelled directly to a corporation without any thought or concern of the local economy.
> Fuck local businesses, we want to give all our money directly to multinational conglomerates so all of the profits can go into yacht fuel for the execs.
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I think people feel like they have had horrible experiences with dealers and they think it would be so much easier to just order whatever they want from the manufacturer website. I think ultimately it wouldnt change much from a user experience.
I can imagine that this could be good for more international brands who don’t have factories or dealerships in the US. Past that, this could damage the market for dealerships and might actually help with used car market as it’ll be pushed into customers
Trade-ins highkey might be more difficult to do if you’re ordering from a website with an automaker
Didn't think about trade ins. Interesting.
I meant to put in my original comment that due to the international stuff, I wonder if we will keep the current system a little longer. Helps block the BYDs of the world.
I’d imagine third party dealers will shutdown and bigger dealers in major cities and busy suburbs will stay for maintenance, better warranties/refreshed warranties, and begin more HQ Dealers to show off more premium offerings
Used cars in carvana/carmax will spike and in marketplaces
The NADA is super powerful and will lobby to the death for dealerships.
In the past, the dealership was family-owned and active in the community, so it was way better to buy from them than massive corporations like GM, Ford etc.
Today, a lot (the majority of?) car dealerships are owned by Asbury, Lithia, Penske, AutoNation… which are massive Fortune 500 corporations. I have trouble seeing how that’s any better than just buying from the manufacturer.
In my area, most of the dealerships are owned by Asbury, but they bought the rights to the original family-owned name, so you wouldn’t even know that it’s not a family owned store.
Over 85% of franchise car dealerships are family owned. The largest auto group in the US only operates 300 dealers.
It's better than buying from the manufacturer because that creates competition. If you bought directly from the manufacturer, you wouldn't be able to compare prices. OEMs could set their profit wherever they like (which they already do to dealers).
They'd also need to take on all of the overhead franchisees are absorbing now, so there's no reason to believe that cost would be eliminated, either. In fact, there's every indication mainstream OEMs aren't even interested in direct sales.
I think franchise laws probably aren't needed anymore, but I don't believe for a second that manufacturer-run dealerships would be better than the current system.
Given my personal experiences with Amy dealer I’ve ever tried to do business with, fuck the NADA. There’s a reason why the last three vehicles I’ve bought were used from
Carvana. I hope Scout wins this. I doubt they will, but I do hope.
I remember there was a thread a while back asking how you know someone is not a car person. My first thought was someone who says they bought a car through carvana.
As opposed to buying through a dealer who knows less about the cars they sell than you do, and whose only interest lies in predatory upselling to unsuspecting people?
At least no one at Carvana ever tried gaslighting me into thinking that the car with obvious front and rear collision damage wasn’t actually collision damage since “ThE cArFaX iS cLeAn!”
Or tried convincing me that nitrogen in the tires significantly improves fuel efficiency because it is lighter than air and literally makes the car lighter.
Or played the “oh, it’ll be a couple hours before we can return your car to you, are you sure you don’t want to go ahead and buy this one since we’ve already taken your trade in to clean it up?” game.
But Carvana has played the "Don't worry, if you don't like the car you have XX number of days to return it, no questions asked" but then they deliver the car 2 months late after you already started making payments on the loan and then forget to also deliver the keys with it. Fortunately, you get the keys but its after the trial period is over and you can no longer return the vehicle.
Carvana has pretty decent standards. DriveTime is the one you want to avoid at all costs. I've reconditioned used cars for both and Carvana was way better. DT glues broken shit back together and slaps LKQ junkyard parts on their turds.
My experience with Carvana was a car that should have been a total loss but became my problem.
The person who sold it to Carvana rear ended something carrying an acid of some sort. The front trunk lid, bumpers and fenders all had brand new paint - I could still smell it when I saw the car in person for the first time. The rest of the car was covered in pit marks from the acid burning through the paint. The owner of my local body shop was able to explain to me that this stuff eats into the metal and so a new paint job will only look good until the acid starts eating it's way back through. The car would need to be stripped to bare metal and treated before it's primed and painted. He vaguely quoted $30K and told me to just return the car.
So the Cayman got returned and I'll never use Carvana again. The car never should have passed their inspection.
That's a crazy case. If it took time for the damage to show it could've just been an oddball thing that was missed since it happened before carvana bough the car. A lot of the cars they buy are basically sight unseen auction cars. The inspectors are also human and miss stuff sometimes. It's hard to catch everything when you have a list of 200+ things to check and only 2 about hours to do it.
Having sold a car to Carvana back when they were offering good values, no they have no standards what so ever. The buying process took less than 15 minutes including signing the paper work. They walked around it quickly, drove it up the street and back then loaded it up. Didn't even open the engine bay.
I would never buy from them. Sell to them if they offer a good price though. They don't check anything.
They don't just throw your car on a lot it goes to an inspection center. Buyers don't have to inspect the cars super thoroughly they usually just have a range of price they're allowed to spend and then it's up to the inspectors and technicians to throughly evaluate the car against the companies book of standards.
My experience with Carvana was the recon process barely existed; glaring issues were fixed but most units passed through without much more than a cursory glance.
The sad part is they do more than most. Or at least that's how their standards and processes are set up. If their inspectors and techs are letting things slide when they aren't supposed to then that's a whole other story but definitely possible because some shop managers tend to favor production over quality to make themselves look better.
Yep… at the one I was at they only cared about customer surveys and volume. Bit ironic given better quality means better surveys but gotta get those production bonuses. Carmax had the best recon process of all the used dealers I’ve worked at or with.
Yeah DT and carvana are sister companies iirc, DT got all the scraps from auction that weren't good enough for carvana and then half assed the repairs as much as possible
“ I hate dealer network so much that I bought my car from a predatory lender disguised as a car vending machine, owned and operated by a father-son grifter team that is almost unmatched in modern history”
What’s wrong with them? I’ve been looking at some stuff through them recently because I’ve heard they actually provide great warranties. But yeah I’d like to know what to expect.
Lol what? I haven't even experienced Caravana, but I can tell you with absolute certainty that Carmax is also selling you junk they don't inspect. They buy a car at auction, pay a stoner $10/hour to detail it, and throw it on their website.
The good is that they will buy absolute garbage from you for great money as long as its reasonably new.
The bad is that they'll only check the obvious, make sure it isn't too rusty, and will sell far-from-perfect cars to others.
The good is that they honor their return policy and are eager to repair.
as long as you can deal with that back and forth, they're fine
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If they lose, they now have to still deal with a bunch of pissed off dealers who have maintained their political clout. Hence why it’s easier for new manufacturers without an established dealer network to do this.
Not going to happen in my state when Tesla argued for this they said it was unamerican to not let car dealers make as much money as possible from customers and that they would go out business and it would disadvantage consumers as it would mean lower prices on cars.
NnNNNNNNNNNNNNNNnnNNNNNNNNNNNNOOOOOOOOOOOOO@@!!!!!! if they do that, then I won't have the privilege of going to the dealership, telling them a specific car model I'm interested in buying which is being produced right now and then have them TOTALLY FUCKING IGNORE ME! NONONOOO PLEASE KEEP DEALERSHIPS IN PLACE! THEY PROVIDE SOOOOOOOOO MUCH VALUE! !! HOW WILL WE EVER RECOVERRRRRRRRRRRRRRRRRRRRRR?@!!?!?!
/s
In light of Musk's antics, our (NY) Senator was trying to revoke Tesla
s waiver that lets them do direct-to-consumer in NY bypassing dealership franchises. Not like the law backing that was particularly old either, the ban on dtc only came in 2014 (heavily lobbied by dealerships, to no surprise).
Regardless of how you feel about tesla pushing direct-to-consumer sales for cars is the single greatest thing they've done and its incredibly stupid dealerships are as protected as they are in this day and age.
Good, dealer lobby sourced protectionism is unnecessary and add costs. This isn’t the 1930s anymore.
Also, dealers these days are not mom & pop operations, they are often parts of huge multi-billion dollar dealer groups.
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