Kill the laws that keep car dealers in business • Hacker News Board

Re: Kill the laws that keep car dealers in business

#251

Post by SilasX » Wed, Oct 28, 2015, 5:58 PM UTC

maratd wrote: post #167

venning wrote: post #138

Earlier quoted context omitted.

Absolutely. Regulatory capture is a real thing and a really bad thing. I'm certainly not defending the franchise protections. I would just like to be clear: people get hurt when we uproot the status quo quickly. That isn't to say we shouldn't do it. There aren't easy answers here, particularly for the legislators who have to make those decisions.

> There aren't easy answers here I don't think the circumstances are as grim. Most of the personnel retained at a dealership do useful work. That same work will be required regardless of who runs the show. They may need to apply for a job at the new factory store, but that's really the extent of the displacement. You're not eliminating an entire industry. You're re-organizing it to reduce friction.

So there's an active, non-artificial market for scummy negotiating tactics and pressuring people to take deceptive financing deals?

Re: Kill the laws that keep car dealers in business

#252

Post by mikeash » Wed, Oct 28, 2015, 5:59 PM UTC

notjoedimaggio wrote: post #63

nomercy400 wrote: post #30

Earlier quoted context omitted.

Shouldn't you have a free market economy? Where a customer is able to choose between a dealer or a direct sale company? The customer is the one that should be able to choose between a cheaper price with a lower service, or a higher price with more service. The problem here is that companies want to provide the cheap alternative but aren't allowed to do so. If a dealer cannot compete with a direct sale company on pric…

I agree in theory, but the reality is that these companies made large investments under one set of legislation. If a society flips and completely changes the economic/legislative landscape under which companies operate, it creates a very unstable business environment and discourages capex especially. This would not be good for the long term economic health.

Removing protectionist laws that allow certain businesses to flourish by restricting competition should only create uncertainty in other areas where there are similar laws. I don't believe there are many such areas. The only other industry I can think of where there are mandated middlemen is alcohol, and it would be great to fix that too.

Re: Kill the laws that keep car dealers in business

#253

Post by mikeash » Wed, Oct 28, 2015, 6:03 PM UTC

bgribble wrote: post #7

Yep, buying a car sucks. But this is one of the largest supply-chain operations in the world. The dealer franchise system and its legal framework have evolved over 100 years and are balanced pretty delicately. It can't just be refactored by waving a regulatory wand at it and hoping for the best. Cars will still have to be warehoused, delivered, serviced, and resold. Somebody has to buy your old junky trade-in. Somebo…

> Or just open a direct sales channel to compete with dealers, but make the existing dealers perform service and deliver inventory? And take your trade-in?

I don't really understand this. You won't have to make them perform service. Dealers love performing service. It's where they make their money. The car sales side mostly exists to drive business to the service side.

Deliver inventory? If they can do it better than the manufacturer, sure. If they can't, then why should that side exist? Whoever can do the best job should be the ones doing it.

Take your trade-in? Most places just sell your trade at auction, and make a profit on it. I don't see why they would stop this, or be unwilling to do it.

Either independent dealers provide value, or they don't. If they provide value, they should be able to survive in an environment where manufacturers are allowed to sell directly to customers. If they don't, then why are we keeping them around?

Re: Kill the laws that keep car dealers in business

#254

Post by steamer25 » Wed, Oct 28, 2015, 6:12 PM UTC

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…

I think a better analogy would be a bear-trap or a land-mine. The powers granted to government exist to deny life, liberty and property to those who violate the law. They're fundamentally destructive. Although we intend that they only be used in suppressing illegitimate force and fraud, that's not always the case.

Under this analogy, I think it's quite reasonable to question why we have so many of these very dangerous laws just lying around waiting to ruin someone's life. Absent very compelling and readily apparent reasons for keeping them in place, the default course of action should be to disable and remove them as quickly as is safe to do.

"A generation may bind itself as long as its majority continues in life; when that has disappeared, another majority is in place, holds all the rights and powers their predecessors once held, and may change their laws and institutions to suit themselves. Nothing then is unchangeable but the inherent and inalienable rights of man." --Thomas Jefferson on the dubiousness of pre-supposing that perfect and timeless wisdom guided anyone who's ever deigned to enact a law.

Re: Kill the laws that keep car dealers in business

#255

Post by gherkin0 » Wed, Oct 28, 2015, 6:15 PM UTC

JoeAltmaier wrote: post #200

ethbro wrote: post #199

Earlier quoted context omitted.

To compare and contrast the two methods of research/purchase: both online and in person feature the same marketing jargon. Online: You can perform further self-guided research to discern what these terms actually mean and whether you need those features or not. Furthermore, you can see what other people thought about those features. In Person: You can have the salesperson explain those terms to you. Except... do you…

In person is there for one reason: so the salesperson can direct the dialog, completely control the conversation. They are heavily trained in the dance of sales, and its all in their interest and not yours. The primary reason to get the dealership out of the picture is, to get the salesperson out of the picture. You don't buy a toaster that way, or even a house. Why a car?

They're honestly not that bad if you keep control of the conversation (to the point of being willing to walk in response to BS) and double-check their claims. You actually have a lot of the power in that relationship, since usually the salesman needs your sale more than you need to buy from him.

I actually like doing a lot of initial research face-to-face with a person. It's higher bandwidth, and the car is there in front of me, so I can get a sense of the intangibles and other facts that are hard to capture online.

Re: Kill the laws that keep car dealers in business

#256

Post by nemo44x » Wed, Oct 28, 2015, 6:16 PM UTC

drzaiusapelord wrote: post #211

Retra wrote: post #208

Earlier quoted context omitted.

"[T]he trade-in cost for my car they offered was literally half its market value." I'm curious why you'd expect them to take it for more? They wouldn't do trade-ins if they couldn't profit off of them, and you can't buy things for market value and run a successful business. If you want close to market value for your car, you have to sell it yourself. And if you think about why you didn't do that, you can see why it c…

I expected a bit more than 50%. Anyway, my argument isn't about trade-in sales, its about typical profits of dealerships. They absolutely do not make "only $200" per car. When you factor all the things they typically do, they can and easily do thousands per car sale.

They make their money on a few things outside the profit from the can, which is in fact very low.

They make a killing on your trade-in.

They make a killing on extended warranties on used cars.

They make a killing on maintenance and oil changes and the packages they sell around these things.

So although in general they make more than $200 or whatever on the new car sale, they make their real money on everything else around it.

Re: Kill the laws that keep car dealers in business

#257

Post by unabridged » Wed, Oct 28, 2015, 6:17 PM UTC

fluxquanta wrote: post #164

TheCondor wrote: post #127

Earlier quoted context omitted.

The article misses the issue. New cars are very nearly sold direct, the dealer doesn't arbitrarily mark up prices, in fact I think some manufacturers prevent it. There is a fixed profit for the dealer, for the most part. The manufacturers go to fairly good lengths to get the cars people want to the dealers too and then they try to have an assortment of dealer customizations that can be done, like the dealer can chang…

I work in the used car industry and it hurts my soul. You're absolutely right that it needs disruption, specifically the "buy here-pay here" (BHPH) model. BHPH sales are when people with no/terrible credit get an overpriced used car financed by the dealership where it was purchased at 29% interest and $300 bi-weekly payments (for example). The dealers bank on the fact that these people will probably default in a coup…

When a customer is offered a monthly/weekly price of $X and the car is in the exact condition described by the dealer, it cannot be a ripoff. Now if the dealer is filling their head with nonsense like the car's value will increase over time (a la mortgages), then maybe you might have some fraud aspect.

Laws can't protect stupid people from wasting their money and I don't want a world so locked down where they could. And what's the worst case scenario? The car gets repossessed and their credit goes down (ie less people will trust them to make purchasing decisions in the future). There is no debtors prison and its highly unlikely they would have wages garnished unless the car was destroyed.

Re: Kill the laws that keep car dealers in business

#258

Post by dragontamer » Wed, Oct 28, 2015, 6:22 PM UTC

ergothus wrote: post #237

I used to work with a company that worked with dealerships, and I learned some pretty surprising (to me) details. For example: In most cases, the dealership buys the cars on the lot from the manufacturer via vastly short term loans. When the above article mentions the cost of sitting inventory, I assume that is what is being discussed. This isn't like inventory in a store, where the main concern is that it is losing…

IMO, parts & service is significant value-added for consumers. For DIY, having a place to pick up a specific hose or brake rotors is always nice. There are online shops of course, but if you're shopping for OEM parts it seems like online prices aren't too much better.

For those who don't have mechanic skills, knowing that the dealership is trained to _only_ work on your model of car is extra assurance that they'll do it correctly. (EDIT: Not a guarantee of course, but any extra assurance is helpful)

Re: Kill the laws that keep car dealers in business

#259

Post by swatthatfly » Wed, Oct 28, 2015, 6:22 PM UTC

maratd wrote: post #235

swatthatfly wrote: post #225

Earlier quoted context omitted.

> Most of the personnel retained at a dealership do useful work. That same work will be required regardless of who runs the show. Some people may benefit from this "service", but not me, nor any of the people I know. The only benefit I could see from my previous buying experiences is the act of handing out the key for a test drive. Everything else was simply designed to extract as much money from my pocket without gi…

Salesmen aren't a substantial part of the workforce in a dealership. Mechanics, secretaries, service coordinators are. You still need those. Finally, while you're OK dropping the equivalent of a year's pay on a website, most people are not. They need to talk to someone. So you're still going to need salespeople ... although they'll be far more pleasant to deal with, since there will just be one price that everyone pa…

> Salesmen aren't a substantial part of the workforce in a dealership. Mechanics, secretaries, service coordinators are

You're describing a regular garage here. We have those on most corners. Some also sell used cars btw. The argument is centered around the sales activities, hence the comment.

Re: Kill the laws that keep car dealers in business

#260

Post by fineman » Wed, Oct 28, 2015, 6:24 PM UTC

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…

Um, graft. Like all other cases of protectionism. There was once a problem and someone suggested regulation to fix it and now that the problem is gone the regulation remains.

There are two fundamental issues here. 1) Why is commercial driving complex 2) Do we need a rent-seeking monopoly industry to solve the issues for us?

The answer for #2 is a resounding no.