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Kill the laws that keep car dealers in business

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Re: Kill the laws that keep car dealers in business

#81

Post by bane »

jasode wrote: post #68
venning wrote: post #37

I paused my software development career to sell cars for a year. I sold cars at two different Honda dealerships, both owned by Fortune 500 companies in, what I believe is, the densest single market for Hondas in the US (Metro DC). There's a couple things missing from the situation as described by the author. First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. Used…

>A dealership inventory is controlled in such a way that area dealerships are forced to compete heavily with each other. In order to sell a car, you have to have a car on your lot. In order to have a car on your lot, you have to order it from Honda. Maybe Toyota does it differently from Honda but this is the way the Toyota dealership manager explained it to me: all the dealerships are grouped into a "region" such as…

I just purchased a new Honda and this is basically what happened. The car I wanted wasn't at the dealer I was at, so they sent a guy 100 miles away to another part of the region to drive it back down so I could drive away with it that day. They knew from the shared inventory system that the other dealer had it.

I had negotiated a pretty large discount on the car so I have no idea what sort of shenanigans the two dealers had to go through to exchange inventory.

Re: Kill the laws that keep car dealers in business

#82

Post by bane »

alkonaut wrote: post #56
venning wrote: post #37

I paused my software development career to sell cars for a year. I sold cars at two different Honda dealerships, both owned by Fortune 500 companies in, what I believe is, the densest single market for Hondas in the US (Metro DC). There's a couple things missing from the situation as described by the author. First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. Used…

> In order to sell a car, you have to have a car on your lot. I don't understand the above: you mean people buy new (unused) cars from dealers, "off the shelf"? Aren't most new cars custom? Are US customers more impatient, so that in order to close a sale you need to have the various options pre-built, so that people don't have to wait four months for their new car to be built? I have rarely seen a new car sitting at…

Yes. In fact the threat of leaving that dealer for the one down the road who had the model the buyer wants provides a negotiating advantage.

It also drives other interesting behavior, like people driving their cars until they are literally on their last legs and then dumping them off at the dealer on trade-in, knowing they wouldn't have been able to drive their old car home because it would have died on the way.

Re: Kill the laws that keep car dealers in business

#83

Post by venning »

jasode wrote: post #68
venning wrote: post #37

I paused my software development career to sell cars for a year. I sold cars at two different Honda dealerships, both owned by Fortune 500 companies in, what I believe is, the densest single market for Hondas in the US (Metro DC). There's a couple things missing from the situation as described by the author. First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. Used…

>A dealership inventory is controlled in such a way that area dealerships are forced to compete heavily with each other. In order to sell a car, you have to have a car on your lot. In order to have a car on your lot, you have to order it from Honda. Maybe Toyota does it differently from Honda but this is the way the Toyota dealership manager explained it to me: all the dealerships are grouped into a "region" such as…

Yes and no. Yes, we could see the inventory of every Honda dealer in the region. And yes, we could exchange cars.

However, the "requirement" that cars be swapped was something that managers told customers to ease their minds while they steered them towards a car that was on our lot. The only requirement was that both dealers had to agree on which cars were being swapped.

Why tell them that? Because managers are loathe to exchange cars since it often doesn't work out:

- We couldn't legally bind them to buy a car we didn't have possession of yet, so we had to wait for the exchange to finish.

- Customers change their minds easily and may not really want the car once they see it. Or, they may hear back from another dealer while you're exchanging and go there instead.

- It takes a salesperson off the floor for hours which costs the manager money.

- The other dealer gets to demand what they want of your inventory and may ask for a higher-demand vehicle in exchange.

- Customers hate having "mileage" on a new car (I once had to swap a 21 mile car for a 7 mile care because a customer was so put off) and the manager knows that once they see the "mileage" they may decide otherwise.

That said, a manager may authorize a transfer for rare cars. I once had to drive for an hour and half, from Virginia to Maryland, to another dealer in an S2000 to exchange based on color. Got turned around leaving the other dealer, wound up in Pennsylvania. My manager never believed that I didn't go for a joyride.

EDIT: How do you create bullet lists on HN?

Re: Kill the laws that keep car dealers in business

#84

Post by gotchange »

joosters wrote: post #61

"Don’t ever take a fence down until you know the reason why it was put up" You can't write a balanced article on car dealerships without researching why these laws were enacted in the first place. So many people here just assume "oh, it's because of greed" - but perhaps you should spend a short time first of all investigating why these laws were created and the problems they were trying to solve. Likewise, you can't…

> "Don’t ever take a fence down until you know the reason why it was put up"

Why would you assume that such a fence was erected for a good reason and not out of malice or for personal gains?

Re: Kill the laws that keep car dealers in business

#85

Post by jasode »

bane wrote: post #81
jasode wrote: post #68

Earlier quoted context omitted.

>A dealership inventory is controlled in such a way that area dealerships are forced to compete heavily with each other. In order to sell a car, you have to have a car on your lot. In order to have a car on your lot, you have to order it from Honda. Maybe Toyota does it differently from Honda but this is the way the Toyota dealership manager explained it to me: all the dealerships are grouped into a "region" such as…

I just purchased a new Honda and this is basically what happened. The car I wanted wasn't at the dealer I was at, so they sent a guy 100 miles away to another part of the region to drive it back down so I could drive away with it that day. They knew from the shared inventory system that the other dealer had it. I had negotiated a pretty large discount on the car so I have no idea what sort of shenanigans the two deal…

>I had negotiated a pretty large discount on the car so I have no idea what sort of shenanigans the two dealers had to go through to exchange inventory.

The Toyota manager said they exchange on either MSRP-to-MSRP or dealer-cost-to-dealer-cost basis. Either way they do it, it comes out the same for them. Whatever amount of discount you were able to negotiate from a dealer would be independent from their internal swap basis.

Re: Kill the laws that keep car dealers in business

#86

Post by aianus »

Spooky23 wrote: post #80
joosters wrote: post #61

"Don’t ever take a fence down until you know the reason why it was put up" You can't write a balanced article on car dealerships without researching why these laws were enacted in the first place. So many people here just assume "oh, it's because of greed" - but perhaps you should spend a short time first of all investigating why these laws were created and the problems they were trying to solve. Likewise, you can't…

That's very logical. But the en vogue approach today is to disrupt everyone out of business because technology entrepreneurs and capitalists are "good guys". The argument for this stuff is mostly "OMG Tesla is awesome!". But folks forget/ignore that having to deal with A fortune 50 company as a consumer isn't fun either (recall: AT&T in the old days). Your local car dealer may have annoying commercials, but the folks…

Then buy a Tesla instead of a GM shitbox. What's your point?

Re: Kill the laws that keep car dealers in business

#87

Post by ssharp »

gotchange wrote: post #84
joosters wrote: post #61

"Don’t ever take a fence down until you know the reason why it was put up" You can't write a balanced article on car dealerships without researching why these laws were enacted in the first place. So many people here just assume "oh, it's because of greed" - but perhaps you should spend a short time first of all investigating why these laws were created and the problems they were trying to solve. Likewise, you can't…

> "Don’t ever take a fence down until you know the reason why it was put up" Why would you assume that such a fence was erected for a good reason and not out of malice or for personal gains?

That's the exact idea -- you don't know, so don't assume and do your research.

Re: Kill the laws that keep car dealers in business

#89

Post by ywy9876 »

venning wrote: post #37

I paused my software development career to sell cars for a year. I sold cars at two different Honda dealerships, both owned by Fortune 500 companies in, what I believe is, the densest single market for Hondas in the US (Metro DC). There's a couple things missing from the situation as described by the author. First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. Used…

C_C

Re: Kill the laws that keep car dealers in business

#90

Post by venning »

MrFoof wrote: post #71
venning wrote: post #37

I paused my software development career to sell cars for a year. I sold cars at two different Honda dealerships, both owned by Fortune 500 companies in, what I believe is, the densest single market for Hondas in the US (Metro DC). There's a couple things missing from the situation as described by the author. First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. Used…

>First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. This is essentially the case on all volume mainstream manufacturers. Hyundai/Kia, Toyota/Scion, Honda, Nissan, Mazda, Ford, Chevrolet, Dodge/Chrysler all fall in this bucket in the United States. The exception to this being trucks (RAM, GMC and Chevy Silverado, Ford F-Series). Where money is actually made on sale…

From everything I've read about the industry for the last 15 years, this is all completely correct and serves to demonstrate why it's such a hard industry. Extremely high costs, low profit margins, fiendish competition, considerable regulation, and absolutely no guarantee that the new product you just invested billions in won't flop after you've done all the work.
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