The Public's Perception of Car Dealerships: A Complex History
In 2014, a study conducted by Edmunds found that an alarming number of Americans would give up sex for a month to avoid the process of haggling when buying a car. Furthermore, it was revealed that one in three individuals would rather do their taxes than engage in this form of negotiation. These findings suggest that there is a deep-seated distrust towards car dealerships among consumers. According to a Gallup poll, car salespeople were ranked dead last on a list of professions and their perceived commitment to honesty and ethics, landing below lawyers, insurance salespeople, and even members of Congress.
The origins of this negative perception are complex and multifaceted. In the past, consumers had a plethora of options when it came to buying a car, with many manufacturers offering a wide range of models and dealerships across various regions. However, in an era where online shopping has become the norm, it is still challenging to purchase a new car directly from the manufacturer's website.
To understand why this is the case, we must delve into the intricacies of the automotive industry. The main reason behind this limitation lies in the regulatory framework that governs the sale of vehicles. In most countries, including the United States, dealerships are required by law to act as intermediaries between consumers and manufacturers. This means that they must meet certain standards, such as providing financing options and ensuring compliance with safety regulations.
Moreover, dealerships often play a crucial role in facilitating the process of buying a car, which involves negotiations, paperwork, and testing drives. While some may view this as an inconvenience, others see it as essential for building trust between consumers and manufacturers. However, this perceived value is often lost on consumers, who may feel that they are being taken advantage of or misled.
The public's perception of car dealerships has become increasingly negative over the years, with many viewing them as untrustworthy and dishonest. This sentiment is not unfounded, given the prevalence of aggressive sales tactics, hidden fees, and other deceptive practices within the industry.
In an effort to address these concerns, some manufacturers have begun to explore alternative models for selling cars directly to consumers. However, this approach is often met with resistance from dealerships, who fear that it will disrupt their business model and lead to a loss of revenue. As a result, the debate surrounding direct-to-consumer sales continues, with no clear resolution in sight.
In conclusion, the public's perception of car dealerships is complex and multifaceted, rooted in a combination of historical, regulatory, and cultural factors. While some may view dealerships as necessary intermediaries between consumers and manufacturers, others see them as exploitative and dishonest. As the automotive industry continues to evolve, it remains to be seen whether direct-to-consumer sales will become more prevalent, and if so, how this shift will impact the traditional dealership model.
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The BMW M3: A Rare Opportunity for Car Enthusiasts
In a recent video, car enthusiasts were treated to an exclusive opportunity to win a 1988 BMW M3. This rare and iconic vehicle is highly sought after by collectors and driving aficionados alike. The BMW M3, produced from 1986 to 1991, was designed as a high-performance variant of the E30 model, with the aim of creating a more agile and responsive driving experience.
The winning car on display features a 2.3-liter, naturally aspirated inline-4 engine, which is paired with a five-speed manual transmission. The vehicle's signature box flares adorn both the front and rear ends, while M3 badges are prominently displayed in the grill and trunk panel. For those who would love to own this incredible machine, Omaze has partnered with Donut Media to offer a chance to win it.
To participate in this exclusive giveaway, car enthusiasts can visit omaze.com/donutmedia and make a donation to support The Skate Park Project, founded by Tony Hawk. Every donation made will contribute to the project's mission of building skate parks for underprivileged youth.
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A Chance to Win the BMW M3: Make Your Donation Today
Are you a car enthusiast looking for an incredible opportunity? Do you want to own a rare and iconic vehicle like the 1988 BMW M3? Look no further than Omaze, in partnership with Donut Media. By making a donation to support The Skate Park Project, you will have a chance to win this remarkable car.
Donating to The Skate Park Project is not only a great way to give back to your community but also offers an exclusive opportunity to own the BMW M3. Each donation made will contribute to the project's mission of building skate parks for underprivileged youth.
By making a donation, you are supporting the creation of safe and accessible spaces for young people to engage in physical activity and develop their skills. This initiative has already had a significant impact on communities across the United States, providing children with opportunities they may not have otherwise had.
So why not make a difference today? Visit omaze.com/donutmedia and donate to support The Skate Park Project. Every donation counts, and who knows – you might just find yourself behind the wheel of this incredible BMW M3.
WEBVTTKind: captionsLanguage: en- In 2014, automotivemarketplace website, Edmunds,published a study that found1 in 5 Americans wouldgive up sex for a monthin order to avoid the processof haggling when buying a car.And that 1 in 3 wouldrather do their taxes.A Gallup poll found that car salespeoplewere ranked dead lastin a list of professions andtheir perceived commitmentto honesty and ethics.Landing below lawyers,insurance salespeople,and even members of Congress.Safe to say,the public does not likecar dealerships very much.But how did that happen?Believe it or not,consumers used to have a lot of optionswhen it came to buying a car.But now, in an age when youcan buy anything online,you still can't buy anew car from your phone.Today on Wheelhouse,we're gonna find out why it's illegalto buy a car directlyfrom the manufacturer.It's a little more complicatedthan you might think.- A big thank you to Omazefor sponsoring today's video.Answer me this question.If you could win any BMW,what would it be?Say less, my dude.I totally agree. No question.I would want this 1988,E30,M3.And you know what would be cooler?Winning it with taxesand shipping included,all while helping a good cause.This rag... racing...beauty comes equippedwith 2.3 liter, naturallyaspirated inline 4.Those signature box flareson the front and the back.And, of course,the M3 badges, in thegrill and trunk panel.So, for your chance to win this 1988,BMW M3,go to omaze.com/donutmedia and donate.Best of all,every donation supportsThe Skate Park Projectfounded by Tony,"Mr. Pro skater himself" Hawk.Now, their mission is to fundhigh quality public skate parksin underserved communitiesto promote healthy and active lifestyles.So, go donate for your chance to winat omaze.com/donutmedia.Now, back to the show.- Say you're a Teslafan that lives in Texas,and you're finally ready toget the EV of your dreams.The Model S Plaid.You saddle up and mosey on downto one of 13 Tesla galleriesoperating in the state.That's gallery, not dealership.And take a look at whatthey have to offer.You talk to the helpfulstaff about models,performance, options, et cetera.And then you inquire about the price.Well, you just made your first mistake.Why is it that you're notallowed to talk about moneywhen it comes to Teslas in Texas?A lot of people don't know this,but you can't just buy a cardirectly from a manufacturer.Like, you can't walkup to GM's headquartersand buy a Corvette.That's why those companieshave dealerships,but Tesla is the exception herebecause, in most states,they have gallerieswhere you can view the carsand talk to experts about them.Even discuss the options like I mentioned,but they don't have anytraditional dealershipswhere you can purchase the cars.So how do you actually buy one?Well, first, you'regonna have to hop onlineand order your preferred Teslathrough the company's website.Just make sure you're notstanding on the propertyof a Tesla facility while you do that.You place your order and getyour paperwork sent to youfrom a Tesla store, anywhereoutside of the state of Texas.Then you can go aheadand pay for the vehicle.Again, as long as you're noton Tesla owned or rentedproperty, while you do it.And Tesla can then ship the carto one of eight service centersthey have around the state of Texas.At that point, you can go pick up your carand Texas will be more than obligedto register it for you,and collect the appropriate taxes due.Congratulations.You can now chew throughelectrons to your heart's content,or until the batteries run outacross The Lone Star State.So why the run-around?Well, the very thingthat's preventing Texansfrom buying Teslas directlyfrom the manufactureris the same thing that prevents youfrom buying a Chevy, or a Ford, or a BMW,anywhere but a dealership.State franchise laws.These laws were passedway back before Teslawas even an inkling in the mindsof Martin Eberhard and Marc Tarpenning,back before World War II, in fact.And the reasons theycame about are varied,complicated, and onsome levels, antiquated.Before state franchise laws,manufacturers sold their productsthrough many differentdistribution methods.You had dealer franchises,factory owned stores, wholesalers,retail department stores,consignment arrangements,even traveling salesman. I'm not joking.It was the Wild West of selling cars,and it was time for thelaw to come to town.Now, the optimistic storybehind state franchise lawsis that they were intendedto protect the consumerand local communities.The reasoning given back thenwas that people opening up dealershipswere independent entrepreneursspending their own money to buyor lease land and equipment,build facilities, and hire local people.And if the major automanufacturers could just come inwith their nearly limitlessresources at their disposalto set up their own distribution,no one on the local levelcould possibly compete.A local dealership could spend years,and hundreds of thousands of dollarsestablishing a presencein a particular territory,and a manufacturer could just swoop in,run them out of business byundercutting them on price.That's not good.Even if they didn't driveindependent dealershipsout of business completely,without laws in place toprotect local entrepreneurs,manufacturers could justbully anyone they wanted,doing things like forcing dealershipsto buy unsold vehiclesfrom the current modelyear, under the threat,of not sending any of the upcoming modelswhen they came out.The more cynical take is thatthe state franchise law modelsaved the auto manufacturersthe money, time, and hassleof opening up their own storesin cities across the country,allowing them to pass thatcost onto dealerships,and as a result, the buyers,and to quickly establish a presencein multiple markets, all at once.So instead of buying youriPhone from the Apple store,it'd be like, if you could only buyfrom a licensed independent dealerwho first bought thephones directly from Apple,marked up the product,and then turned aroundto sell it to you at a higher price.It doesn't sound like avery good deal, does it?Regardless of their reasons,dealerships went aroundlobbying state legislaturesto pass these laws.Their arguments when something like:"Mandating the franchise modelwill keep the dealerships and their ownersas upstanding membersof the local community.More likely to hire locally,support local businesses,and take pride in theirproducts, and repairs,throughout the life of the vehicle.More than that,in markets large enough to supportmore than one dealership ofany particular manufacturer,the franchise modelwill foster competition,driving down prices, and givingan incentive for dealershipsto go the extra mile inpleasing the customer,whether that's better financing options,or better sales and service experience."For example, if every Chrysler dealershipis owned by Chrysler,the price of a 1952 Imperial is the same,no matter what showroomyou happen to wander into,giving no incentive forcompetitive pricing.And when it comes timefor a recall, or a repair,it's a lot harder for afranchise owner to live downshoddy warranty workwhen your kids both playon the same Little League team.Unfortunately, though, these predictionshaven't exactly come to pass in reality,or even by dealer's own admissions.Manufacturers alreadyset their market priceat the highest pointthey can get away with,whether that's at awholesale or retail low,and any attempt to increaseover that price pointwould just drive down thedemand in an elastic market,offering an advantage to the competition.And with the franchisemodel requiring dealershipsto maintain huge inventories of cars,the cost of that maintenancewill always be passedon to the consumer.In fact, as I said earlier,that's the very reason why dealershipsinitially started lobbying for these lawsin the first place.The worry, that they put in the effortto establish a footholdin a certain market,only to have the manufacturers come inand take over by offering the productat a lower price.The dealers already admittedthat they simply can't competewith manufacturers when it comes to price.A fact that should be obvious to anyone.These arguments were very successful,at least at the state level.And today, every US state has some versionof franchise laws on the books.And federally,with the "automobile dealersday in court act" of 1956,say that three times fast,dealers are allowed tobring a federal suitagainst any manufacturerwho fails to complywith the terms of a franchiseagreement, or terminates,cancels, or refuses, to renew a franchise.Sounds good, right?So where did we go wrong?Well, today your local dealershipprobably isn't very local,or at least the numbersare trending that way.Today, there are around17,000 dealers, nationwide,compared to more than22,000, just 10 years ago.That's a drop of around 20%.And the trend is continuing.Your average dealer is far fromthe mom and pop shop of yesteryearwho struggled to justbarely make a living.Massive, publicly tradeddealership groups, like AutoNation,and Lithia Motors, arebuying up and consolidatingindependent dealershipsas quickly as they can.And the result is higher cost for youand higher profits for them.In the last decade,Lithia saw their sales revenuejump from 2 billion to 12.7 billion,and AutoNation saw an increasefrom 12.5 billion to 21.3 billion.And that's not just because of inflation.According to the NationalAuto Dealer Association,the 16,623 franchise lightvehicle dealers, in the US,sold 14.5 million lightduty vehicles in 2020,a drop of about 15% from the17.1 million sold in 2019.And yet, with total salestopping $980 billion in 2020,that represents an increase of almost 50%.And that's not even counting the moneythey make off repairs.Including that, and you can addanother 100 million to the cat foot.So how does that math work out?Well, it's mostly COVID's fault.Long story short, the bottomfell out of the car marketin the spring of last year.Factories were shut down andsupply lines were disrupted.No one knew what was goingto happen in the world,let alone the auto industry.Then people started shopping again.And the problem was, thereweren't any cars to be had.Demand returned, but supplyhadn't rebounded yet.That's a recipe for disasterfor the average consumer,and dealers had anappetite for destructionthat ended up putting a squeezeon the car-buying public.We're actually gonna go way more in depthon COVID's effect on the car market,in the aftermarket in a few weeks.So make sure you subscribe,so you don't miss that.But, surprisingly, there'sgood news on the horizon.A major portion of thecost of vehicles we buycomes in transportation,moving all those vehicles aroundto the various dealer lotsand in unsold dealer inventory.A 2009 analysis by theUS Department of Justicefound that, in 2008,there were $100 billion worth of vehicles,just sitting on dealer lots,incurring a cost of around$900 million, annually.Keeping cars on hand costs money.Dealers have to pay for huge lots,employees to move, wash,and maintain them, and more.That same study foundthat if our national dealer systemmoved to a build-to-order model,like they use in othermarkets around the world,costs could be reduced by 8.6%.I know that doesn't sound like much,but with the average car price tageclipsing $40,000 this year,an extra 3,500 bucks in your pocketdoesn't sound too bad, does it?Costs aside, who wants to be beholdento whatever the dealer has on the lot.Even with the average dealer,having nearly 600 new and usedvehicles in their inventory,it seems like you never manage to findexactly what you want.Not to mention the cost to the environmentand the wasted space.It seems to benefit no one.It's extra cost for the dealersand less choice for the buyer.And in a world whereanyone with a smartphonecan find out exactly whatdealers are paying for cars,what cars are actuallyavailable in their area,and what everyone else hasalready paid to buy them,the benefits of thedealerships are dwindling.The COVID-19 pandemichas meant that customers,and dealers alike, have had to shiftexpectations and deliverables.With more shopping happening online,people being more willing to waitfor the exact car they want,contactless interactions,and benefits that wouldhave been unheard ofjust two years ago,like return policies up to seven daysif you don't like your purchase,this is already happening.And it doesn't have to end here.Even small steps,like taking care of themajority of paperwork at home,and online, would have a massive effecton the overall satisfaction customershave with the dealershipbuying experience,something that has beenhistorically and notoriously low.Look, I know a fair amount of peoplethat have worked at dealerships.I know some of watching mightalso work at dealerships.We've worked with car dealerships,and they've always been great places,but something has tochange in this processif we want consumers to be happywith their buying experience again.A car is the mostexpensive consumer productmost of us will ever buy.And I know I'd prefer toget exactly what I want,with the exact color, theexact options I choose,rather than having to settlefrom the limited selectionat a local dealership.Getting all that at a cheaper price,without having to haggle for hoursand drudge through moundsof boring paperworksounds pretty great.But for all the talk about franchise lawsprotecting the consumer,we've really gotten theraw end of the deal.It's taken a company, like Tesla,with a disruptive newtechnology and piles of cashto finally make some headwayin breaking the momentumthat the franchise model has built up.The timing is right, too.The auto industry isexperiencing a historic waveof upheaval right now,with manufacturers closing plants,canceling models, andrevamping production,figuring new stuff out, new technologies.Let's extend that to the franchise modeland build a new systemthat benefits dealers,buyers, and even the environment,preferably before I go to buy my next car.Alright, thank you very muchfor watching Wheelhouse.Let me know what youthink of car dealershipsdown in the comments.What have your experiences been like?If you have a good story,a bad story, let me know.What could they have done better?What did they do right?I want to hear about it.I think some car dealersare probably going to be looking at these.Follow doughnut media, on allsocial media, @donutmedia.Follow me @NolanJSykes.If you're a doughnut super freak,hit that "join" button down below,if you haven't alreadyjoined the donut underground.But you get access to a Discord channel,exclusive merch, exclusive videos.We've got a fair amount of those now.It's pretty awesome. They're all awesome.They're all great.Be kind. I'll see you next time.
