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Why do car dealerships exist?

Discussion in 'Anything goes' started by Rusty Shackleford, May 22, 2007.

  1. Rusty Shackleford

    Rusty Shackleford Active Member

    Why can't I just buy my car direct from Dodge, or Honda, or whatever? Why do I have to go through JimBob's Junker Jamboree?

    As far as I can tell, all dealerships do is jack up the price, but they serve no real purpose. I can do my own research online, so any supposed expertise they have is useless to me. I could test drive the car just as well if Toyota owned the lot as I could if JimBob owns it. Same thing with the auto shop -- Ford could run it fine without ol' JimmyBob. And if I was buying direct from GM, I wouldn't have the dealership's middle man markup to pay -- I should be able to get the car for what the dealership paid.

    I must be missing something here, right?
  2. Perry White

    Perry White Active Member

    I believe that car dealerships are very effective at lobbying on the state government level.
  3. tapintoamerica

    tapintoamerica Well-Known Member

    Because cars don't last without periodic service. Dealerships don't make money selling cars; they make money fixing cars.
  4. Point of Order

    Point of Order Active Member

    Where would the manufacturer store all the cars they made? There was a famous supply-chain case study evaluating competing models of distribution in the automotive industry. One executive was recommending the auto manufacturer adopt a direct-to-consumer distribution model much like Dell Computers used, while the other thought Toyota's industry benchmarks were a good model for the American complany to follow.

    There are many, many reasons why cars were not like computers, and therefore couldn't fit into that model, including:

    * Autos are generally "pushed" onto consumers, rather than pulled. In other words, the seller dictates what product will be available much more than the buyer. Special orders are available, but not widely used. Consumers usually just take whatever car is closest to what they're looking for. If consumers "pulled" product onto the market, the wait for a car would be extraordinary, becase the manufacturer wouldn't start building until you ordered. No way they could deal with the excess inventory.

    *Labor costs: Dell can adjust its production levels according to orders its receives much more than autos can. Dell doesn't build a computer until it gets an order. Automakers create a production schedule based on expected demand, usually in 6 month or 12-month increments. If the cars aren't selling, they have to have somewhere to put them. Dealers take on the inventory and hold it on their lot until it sales. They're risking a lot when they buy the cars, thus the dealer mark-up.
  5. Mystery_Meat

    Mystery_Meat Guest

    Didn't one of the Asian carmakers try to sell cars direct? Or at least they owned all the dealerships? I want to say Daewoo, but I could be wrong and probably am.
  6. Sam Mills 51

    Sam Mills 51 Active Member

    ... but finding a good mechanic not affiliated with a dealer tends to be better for vehicle, owner and owner's checkbook.
  7. HejiraHenry

    HejiraHenry Well-Known Member

    Technically, you can order a car from a manufacturer and have it delivered to a local dealer, right?
  8. Point of Order

    Point of Order Active Member

    Yep, if you don't mind waiting.
  9. Sam Mills 51

    Sam Mills 51 Active Member

    Sure. There won't be any rebates, incentives and all that jazz since the manufacturers want the dealers to sell from their existing inventory. But any dealer worth a flip will let you order a car in a preferred color and general trim level.
  10. Rusty Shackleford

    Rusty Shackleford Active Member

    I just don't understand why this doesn't work:

    GM creates a production schedule. They build xxx number of vehicles based on expected demand and ship them all over to GM "stores."

    Working at the GM "stores" are GM employees, from the cashiers, since the cars will have dictated prices -- like at a Target (base price is $xxx, one with a sunroof is $xx extra, tinted windows are $xx extra), only a few salespeople, since some people may not know what they want yet exactly but most probably already have some idea, to the managers and mechanics. There's no middle-man markup since GM owns everything involved.

    Everything is exactly as it is now, except there's no middle-man markup and no pushy salespeople, and no chance you're getting screwed on the price of your car -- everyone paid the same thing for theirs.

    GM "stores" can still hold onto a car until it sells, just like JimBob's Junker Jamboree can.

    I just don't understand why this model doesn't work, and much better for the consumer.
  11. HejiraHenry

    HejiraHenry Well-Known Member

    And I prefer my trim level, if you know what I mean ...
  12. John

    John Well-Known Member

    I see your point, Rusty. I much prefer buying Apple products from the Apple store, or apple.com, to buying it at Best Buy, CompUSA or anywhere else.

    I'm sure more people get rich doing it the way it is, and I don't see how consumers can change it.
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