This Looks Very Bad For People Who Work At Car Dealerships

[tammywammy]

16. The reply to that post clearly explains why that won't happen

Nice idea, but you've missed an important detail on May 5, 6:43 PM said:
@International Jeff: I am not aware of even one automaker that is considering direct auto sales with no participation by a dealership. It is actually against the interests of the automakers.

Here's how it works. Automakers rely very heavily on their dealership networks. Most people think that the main goal of an auto dealership is to sell new cars. Guess what, the sale of new vehicles is one of the least profitable departments of a dealership. Used cars typically earn a bit more. But the two true profit centers of any dealership are Parts and Service.

When a person buys a new car from a dealership, that dealership is typically responsible for registering the sale of that vehicle with all necesssary State and Federal Departments, and is responsible for collecting all State and local taxes. Automakers don't want to have to deal with that directly.

All automakers have policies that dealerships must follow, such as the requirement that when a salesperson sells a new vehicle, they must introduce the new owner to the Service and Parts Departments. Why? Because the automaker will make more profit from future parts sales, and needs the Service Department to take care of any warranty or recall issues on behalf of the automaker.

A few years back, Ford experimented with owning and operating their own dealerships. They abandoned that idea, as they quickly discovered how much is actually involved in running a dealership. It is much easier to operate dealerships as franchises, rather than own them.

By the way, it is difficult for anyone to just purchase a dealership as the dealership principal. Most automakers screen potential buyers to make sure that they have actual dealership experience. If you want to buy a dealership, but don't have any dealership experience, then you should look to be an investor with some dealership group, rather than waste your time only to be denied ownership.

Also, I've worked at a few dealerships that had their franchise license revoked by the automaker due to poor customer service ratings. The automakers definitely keep an eye on their dealership network, and take matters seriously.

One more point to make. I recall the ability to order vehicles from the factory over the Internet. However, when that option is available, the automaker doesn't ship the vehicle directly to your house. They send it to either the nearest dealership or to the dealership of your choice. In other words, the vehicle is still handled through the dealership network.

Even if a manufacturer decided to sell direct, they'd still have to maintain a parts & service network. On top of that, the manufacturer would have to then do all the paperwork associated with sales. It's much more beneficial for the manufacturers to use the sales & service agreements they have now, dealerships are not franchises, than it would be for them to take on direct sales.