Why do we need dealers?

[Whyte Rhyno]

I like dealerships. I enjoy spending days looking at vehicles even when not purchasing. My little one (2 yrs old) loves trucks and mustangs so we're at the dealership a few times per month so he can sit in them and play with them. I definitely do not like the dealership experience when it comes to sales. It always seems like salesmen have no idea what they're talking about or interest in learning. Staff retention is poor in most instances. And the money makers that the finance guy throws at you during the deal are annoying to say the least. My service experience at the local dealership has been ok but then again it's basic maintenance stuff that doesn't require ASE certification to accomplish. Dealerships do save the manufacturers money since they don't have to front thousands of retail locations to show, sell, and service vehicles. They can focus on manufacturing and let some middle man deal with the rest. Can't really compare this to what Tesla does since an ICE vehicle is way more complex than a BEV and actually needs hands on to service rather than a laptop and wifi.

 

[Rich Pune]

I agree with your comments on Tesla creating a new model for the car industry. If they can make it work for themselves, I see nothing wrong with it.

I am not sure about your last comment. I live in Texas and I have not had issues with dealers competing for my business when buying a new car. Maybe I missed your “Plattys” reference.

It was sarcasm. There is another thread that discusses how TX dealers are adding $6,000 to the window stickers because of low supply.

 

[kmtweb]

IMO the "Dealer" business model is on its way out, no need for a middle man. Might take 10 or 20 yrs.

It is more enjoyable to order your vehicle and it either gets shipped to you or you pick it up at a showroom

Soon Amazon will be selling vehicles from their website. lol

 

[richtor]

The dealer sales process is antiquated and adds no value - in fact it detracted from my enjoyment in buying the vehicle. I did end up buying from a dealer and the sales guy did a nice job - but I found the vehicle -had employee pricing, so all of this could have been done on line. Ford totally fails in the buying experience- but so do Dodge, GM...

Just because one buys online, if you buy from any manufacturer other than Tesla you purchase from a dealer.

Buying online you still pay a dealer. Even if they deliver to your home the dealer still gets your currency.

1. Should we buy direct from Ford and get rid of dealers?
2. Is it better to purchase from home and not step inside a dealer?

2 completely different questions.

 

[Fredc]

Just because one buys online, if you buy from any manufacturer other than Tesla you purchase from a dealer.

Buying online you still pay a dealer. Even if they deliver to your home the dealer still gets your currency.

1. Should we buy direct from Ford and get rid of dealers?
2. Is it better to purchase from home and not step inside a dealer?

2 completely different questions.

Yes but there still need to be places where you can see the models available and drive before buying. Get rid of the outdated sales process with the Back and forth negotiating. And create better service departments who do exceptional work.

 

[Colfaxent]

With Tesla’s stock hitting 660+ and my truck back in the shop of yet another mediocre dealer, I’ve been wondering: Why do we even need dealers? It seems so expensive to maintain such a network for Ford, including the loss of margin on the vehicles. At the same time, it’s such a competitive, crappy business for the dealer themselves offering no real job securities and horrible pay & work hours. To me, it appears the only “needs” for a dealer from the consumer perspective are servicing related. I’d be fine buying my trucks and cars online straight from Ford, and check them out in person at a few designated showroom locations. Servicing is valid but doesn’t need all the mediocrity around it. If an automotive brand truly wanted to reimagine themselves, why not start by doing away with the sales portion of dealers?

Just so you know Ford doesn't maintain the dealer network, each store is privately or corporate owned very few are owned or operated by the Manufacturer. Also the dealer pay can be very lucrative and especially with the hours worked. I had techs that made 135k a year working 45 hrs a week! And as far as job security Automotive Dealer related positions are in Very High Demand nationwide and they all have high pay opportunities. In my 46 years working for Dealers my toughest job was filling open positions with qualified staff. There is and has been for a long time a shortage of Dealership staff in the nation. This lack of supply and huge demand makes for high pay and dealers stealing each other's staff.

 

[richtor]

Yes but there still need to be places where you can see the models available and drive before buying. Get rid of the outdated sales process with the Back and forth negotiating. And create better service departments who do exceptional work.

Are you saying get rid of dealers or they way they sell? Two different questions.

Many dealers do not negotiate anymore. They sell one price generally a little below msrp. My cousins Toyota dealer does this. Except when they get the new Supra and then it’s $20k+ mark up. Basically saying they can negotiate up but they won’t negotiate down.

Is this what you want?

For the record my cousins dealer did give me family pricing but I was able to beat that by negotiating at a local dealer. Haha

 

[cookiemonster]

It seems like the right solution is exactly what Tesla has been advocating for - don't explicitly get rid of dealers, just update laws to let manufacturers sell direct to customers if they want.

If customers want to see the car and test drive before buying, or build up rapport with the local shop, they can do that. If they'd rather just buy online from ford.com, they should be allowed to do that, too.

Seems that'd add more competition and be good for consumers.

 

[PapaRaptor]

Free Market

How much money does a dealership earn on the sale of a new vehicle?

They make more on used vehicles and service. Without the dealership you would likely pay retail fixed prices, have no access to shopping and test rides. No ability to trade in your used car or truck, You would need to arrange the sale of it and pay extra sales tax as the trade fee lowers your sales tax in most states.

If you hate a dealership or don't like them buy from another. Tesla is huge pain in the ass for the process. They completely "f*#k you on the trade and no negotiating the purchase. It's assumed you just gotta have it. No tanks.

We don't even have one Tesla dealership in Wisconsin, The direct sale auto is against state law. So if you want one you need to drive to Illinois and purchase one and have to deal with that sh*t show, deal with temp plates and sale tax implications. Its not convenient.


I will take the free market and have the ability to choose where I purchase and I keep in mind I do not need to purchase anything. I can always buy used.
By the way Car Max sucks too!!!! just saying.

 

[richtor]

Free Market

How much money does a dealership earn on the sale of a new vehicle?

They make more on used vehicles and service. Without the dealership you would likely pay retail fixed prices, have no access to shopping and test rides. No ability to trade in your used car or truck, You would need to arrange the sale of it and pay extra sales tax as the trade fee lowers your sales tax in most states.

If you hate a dealership or don't like them buy from another. Tesla is huge pain in the ass for the process. They completely "f*#k you on the trade and no negotiating the purchase. It's assumed you just gotta have it. No tanks.

We don't even have one Tesla dealership in Wisconsin, The direct sale auto is against state law. So if you want one you need to drive to Illinois and purchase one and have to deal with that sh*t show, deal with temp plates and sale tax implications. Its not convenient.


I will take the free market and have the ability to choose where I purchase and I keep in mind I do not need to purchase anything. I can always buy used.
By the way Car Max sucks too!!!! just saying.

I know I know. Safeway makes more on a gallon of milk than new car dealers make on new car sales percentage wise.

 

[Rich Pune]

The mountain bike industry has been transitioning to direct to consumer for the past couple of years and there has been some serious growing pains. The one model that seems to work best - or piss the fewest people off - is a hybrid where the consumer can buy directly from the manufacturer or a dealer. If purchased from the manufacter, the bike is shipped to the consumer's local dealer and the dealer gets a portion of the sale. If the manufacturer doesn't have a dealer nearby, the bike is shipped directly to the consumer. I can see this model working for the auto industry as well. Ignoring the extreme folks, it accommodates those that love dealers and those that hate dealers.

I'm not sure how a hybrid set-up would impact haggling, which is prevalent in the auto market, but not in the MTB market. My guess is that it would even out. In my opinion, there are way too many factors that go into figuring out the price of a vehicle. That's why shopping around works. Every dealership is in a unique situation that enables them, or precludes them, from selling at a certain price point.

 

[Trämör]

I’m honestly a bit surprised at how passionately some folks are defending the current system of car sales/dealers. I purposefully asked a provocative question in this thread to achieve this kind of response. It does make me think twice about what the right model is. I don’t think anyone has found it yet, including Tesla, but, I do strongly believe the current one is broken. As usual, the answer is not an extreme but somewhere in the grey zone. I think right now, particularly the sales process is broken. The service experience is probably still salvageable.

 

[jhblaze1]

Tesla is a con.
Without dealers everyone is paying msrp.
Mechanics make up to $50+ an hour.
Dealers biggest profit margin is their service and finance departments.

If your dealer is mediocre why take it there?

This. If Tesla had dealers, people wouldn't be overpaying so much for those flimsy pieces of over hyped shit, they'd be able to haggle on price.

With Tesla’s stock hitting 660+ and my truck back in the shop of yet another mediocre dealer, I’ve been wondering: Why do we even need dealers? It seems so expensive to maintain such a network for Ford, including the loss of margin on the vehicles. At the same time, it’s such a competitive, crappy business for the dealer themselves offering no real job securities and horrible pay & work hours. To me, it appears the only “needs” for a dealer from the consumer perspective are servicing related. I’d be fine buying my trucks and cars online straight from Ford, and check them out in person at a few designated showroom locations. Servicing is valid but doesn’t need all the mediocrity around it. If an automotive brand truly wanted to reimagine themselves, why not start by doing away with the sales portion of dealers?

Secondly, Ford doesn't really maintain a dealer network. Dealers are independent businesses that sell cars at retail that they buy from Ford wholesale.

Dealership employees are employees of Joe Schmoe's Ford, not employees of Ford Motor Company.

It's cheaper for manufacturers to sell at wholesale and be done with it. Tesla has cut out the middle man but now has to maintain its own "dealer"/store network which costs money. The loss of margin on the vehicles is more than offset by not having to maintain the real estate holdings of all the dealerships and the thousands of dealership employees wages and benefits.

The big problem with traditional dealers is that car companies don't set max pricing and they use a ridiculous arbitrary MSRP so dealers have a ton of room to fuck consumers over. In SoCal and probably the rest of this god forsaken state, it's common for dealers to charge well over MSRP as a "market value adjustment". Car buyers are a lot smarter these days and know they don't have to pay anywhere near MSRP so most dealers don't make much money on sales and instead make it on service. Of course there are a lot of people who will just walk in and pay sticker bc they think that's really the price. On those individual sales, the dealer makes a killing. But on MOST sales, the dealer doesn't make a ton of money.

I have a personal rule that if I have the slightest bad taste in my mouth from a dealer I will take my vehicle to a different dealer for all service. That way they get min possible profit out of me on the sale, and $0 from me on service. I typically tell them this up front when finalizing the deal "Ok so look, I know you're not making a lot on this sale but I also know you can still do better. Do better and I'll do all my services here. Don't budge and I'll buy it but you'll never see another penny from me on the service end including warranty stuff and recall work you get to bill back to Ford as I'll bring it to the other Ford dealer up the street".

The dealer I ordered with is playing ball so I'll keep working with them. But when it comes time to ink the final deal, if they won't throw in at least one free oil change then I will take my truck elsewhere for ALL services.

 

[cookiemonster]

The big problem with traditional dealers is that car companies don't set max pricing and they use a ridiculous arbitrary MSRP so dealers have a ton of room to fuck consumers over.

In my head, getting rid of the laws that forbid manufacturers from selling direct would have this effect.

To make an analogy with iPhones, I'm sure there are places that manage to sell iPhones for more than what Apple sells them for. But by and large, people see what Apple charges, so they won't pay Best Buy, Amazon, Walmart, etc. a penny more. But these companies will also do a lot more sales than Apple does to move inventory. So it's not like they just cease existing because Apple can sell direct to customers.

I'd imagine the same experience if the laws were eliminated. We've already got people saying they love the dealer experience and despise trying to buy from Tesla, much like I'm sure people love going to Best Buy to try things out rather than just buying online from apple.com. So now let's go ahead and allow the laws where other folks that don't like the dealer experience can have the free market choice to try out buying direct from Ford.

 

[richtor]

In my head, getting rid of the laws that forbid manufacturers from selling direct would have this effect.

To make an analogy with iPhones, I'm sure there are places that manage to sell iPhones for more than what Apple sells them for. But by and large, people see what Apple charges, so they won't pay Best Buy, Amazon, Walmart, etc. a penny more. But these companies will also do a lot more sales than Apple does to move inventory. So it's not like they just cease existing because Apple can sell direct to customers.

I'd imagine the same experience if the laws were eliminated. We've already got people saying they love the dealer experience and despise trying to buy from Tesla, much like I'm sure people love going to Best Buy to try things out rather than just buying online from apple.com. So now let's go ahead and allow the laws where other folks that don't like the dealer experience can have the free market choice to try out buying direct from Ford.

Your comment is backwards. By getting rid of the dealer network you would be getting rid of free market choice. How do you not understand this?
You are actually trying to make a case for paying msrp for every truck/car you buy from Ford. Seriously is that what you want? If you want to pay msrp any dealer in the nation will sell you a Ford unit at msrp with a smile on their face.

Let me ask you this question is buying direct from ford at msrp better than buying from your dealer at invoice pricing(which many people here have done)?

 

[cookiemonster]

I've very clearly been saying not to get rid of dealer networks. Just eliminate laws that don't allow manufacturers to sell direct. That's all.

If the outcome of opening up to a more free market is dealers go under because no one buys from them, then that's one outcome. Enough people in this thread are advocating for dealers that this outcome shouldn't be a concern or possibility.

 

[richtor]

I've very clearly been saying not to get rid of dealer networks. Just eliminate laws that don't allow manufacturers to sell direct. That's all.

If the outcome of opening up to a more free market is dealers go under because no one buys from them, then that's one outcome. Enough people in this thread are advocating for dealers that this outcome shouldn't be a concern or possibility.

Why would dealers go bankrupt if Ford sells direct at a higher price? Why is it so important to have Ford sell their cars for more money than you can purchase them at your local dealer?

 

[cookiemonster]

Why is it so important to have Ford sell their cars for more money than you can purchase them at your local dealer?

I guess I'm asking the sort of mirrored question - why is it so important to make it illegal for manufacturers to sell cars?

NADA lobbies big time to keep it illegal - why? If manufacturers would fail miserably, then there must be some reason they spend so much money to keep these laws on the books.

 

[richtor]

I guess I'm asking the sort of mirrored question - why is it so important to make it illegal for manufacturers to sell cars?

NADA lobbies big time to keep it illegal - why? If manufacturers would fail miserably, then there must be some reason they spend so much money to keep these laws on the books.

Its a union and like all good union they care more for their own revenue despite what would be best for the dealers.

I still don't understand why people want so badly to pay more for their vehicles?

 

[Tx-Tremor6.7]

Everyone keeps saying Ford would be selling them direct for MSRP. They have been able to stay in business for more then 75 years selling their vehicles to dealers for wholesale/invoice prices which means their business model works at that price point. Who says they would not be able to use modern web-based technology to sell them direct to the public for the same low price? We all know MSRP is a made up number that very few of us would ever pay for a new vehicle.