It is a crime to not go through a dealership.
Or rather, it’s a crime for you – if you decided to manufacturer a car – to try to sell it without going through a middleman. The National Automobile Dealers Association (NADA) has seen to it – for all the obvious reasons.
You are also not the first legal owner of your new car.
The dealer is.
He buys the car from, say, Ford – and pays the cost to have it shipped by rail/truck from its final assembly point to his store. This freight cost – plus mark-up – plus other costs (including “prep”) is then folded into the so-called Manufacturer’s Suggest Retail Price (MSRP), which is what you’re expected to pay for the car.
You then wrassle with him over the bottom line price and – eventually – buy the car from him.
Even if you did a really thorough job researching the MSRP vs. the dealer invoice price (what the dealer supposedly paid Ford – in our example – for the car) it’s highly likely he still made money off you. There are almost always secret factory-to-dealer holdbacks and other incentives which reduce the actual cost of the car to him. And there are numerous opportunities in between that first hello-there handshake and your signature on the contract to pad the bottom line.
The process is purposely designed to be Byzantine.
Which isn’t – as such – evil.
The shuck and jive, the bob and weave – hey, that’s capitalism.
If you have the personality for the ancient rite known as “haggling” – and understand how the game is played – you can sometimes come away from the encounter with a steal of a deal. Or at least, without having been made to squeal. And – yes – dealers can be helpful. It’s sometimes nice to just offload your old car (the trade-in) and drive the new one home. Modern cars are also often pretty elaborate – and having someone explain the features and how things work is a legitimate service. Assuming you need it – and want it.
Which brings us to the real issue here: The involuntary nature of the initial transaction – and the fact that you can’t (legally) end-run that initial transaction. You want a new car?
You’ve got to see Mr. Dealer.
We’re assured by NADA that it’s all very benevolent. That dealers provide a critical support network for car buyers so that when they need a warranty claim handled, it can be done locally, etc. All of this is certainly true to some extent. The same extent that it’s true the DMV provides various its “services” to us . . . services we have to pay for and which, of course, we’re not allowed to say no to.
The question arises – or ought to: If the services provided are so critically desirable, why is it necessary to strong-arm the “customers”?
Readers of this column already know how I feel about Tesla – well, about the car. The idea of using government force to subsidize the purchase of high-end toys by very high-income people is a pretty obnoxious idea. Trabbies (or the modern equivalent) for the Proletariat, that’s one thing. Maybe not a right thing – but plausibly justifiable, if you’re a social-leveler kind of person. On the other hand, handing an LA orthodontist a $7,500 check (the amount of the direct federal subsidy) to ease the bite of paying for his new $70,000 (base price) electric car using funds taken out of the hides of plumbers and roofers driving around in eight-year-old, 120,000 mile Impalas and Malibus kind of sticks in the craw a bit.
But the way Tesla wants to sell its cars – direct buy – is something I can get behind. Go online, pick the model, the color, the equipment – and click pay. It gets shipped right to your house if you want – just like ordering a new flat screen via Amazon.
What Tesla is trying to do does not eliminate the traditional dealership system. No bans have been proposed. No legislation introduced that would make it illegal to sell cars via a dealership.Tesla merely wishes to offer its cars for sale direct to buyer. Ford, et al, would be free to continue to sell cars however they wish.
And – key point – buyers would be free to choose.
That the NADA objects – violently – to allowing people this freedom to choose says a lot. (There’s a good news story about the contretemps here.) Anytime someone insists a given thing is so important that people simply have to be forced to buy it, you know you’re dealing with a con. Football fans pay $100 a pop for NFL tickets – and millions of people pony up $19.99 for Jiffy Lube oil changes – because it seems worth it to them. If it seems like a good deal to buy a car through a dealer – hey, he pulled all the plastic off the seats and gave it a thorough vacuuming before he tossed me the keys – then people will continue to patronize dealerships. No skin off anyone’s nose.
The threat posed by Tesla’s direct-buy model is competition.
Selling cars to customers sans the middleman gives customers an alternative – and this puts pressure on traditional dealers to lower the fees they charge and improve the services they provide.
And that, ultimately, is the crime Tesla stands accused of – and which the NADA is determined to see punished with all the inquisitorial fervor (and lobbying muscle) it can muster.
Why not, instead, just do a better job of selling cars – and make customers happy?
Too simple, I know.
Or perhaps, too much work.
About the writer: Eric Peters is a veteran car/bike journalist and author of Automotive Atrocities and Road Hogs.
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