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

Re: Kill the laws that keep car dealers in business

#261

Post by SilasX » Wed, Oct 28, 2015, 6:35 PM UTC

sliverstorm wrote: post #151

Rumford wrote: post #115

There are some interesting comments in here about how tough the struggle is for car dealerships, but I don't think that necessarily justifies their existence or mitigates the point of this article. If what the dealerships do is valuable enough to the customer, they would exist even without the ban on direct sales. But I think we can all intuit that if the ban were lifted, buying a car would be a very different (and b…

If what the dealerships do is valuable enough to the customer, they would exist even without the ban on direct sales. Can you really make that assumption? Customers act selfishly, and game theory applies here. For example, you try a shoe on in the store and then buy it online for less. The store provided something valuable to you, but you still bought the shoe online. Eventually the store will go out of business if m…

That dynamic actually explains why all big-ticket retailers -- not just car dealers -- need to change business models to something like, "You pay for self-service showroom access to a variety of products, then make your actual purchase from [a level near] the OEM with minimal margin."

The only reason I tolerate(d) any interaction with car salesmen at all is the intangibles you get from a test drive. I would much rather just have some kind of option where I can try out car models at some place that doesn't have financial incentive to make me buy one of them.

Re: Kill the laws that keep car dealers in business

#262

Post by bittercynic » Wed, Oct 28, 2015, 6:39 PM UTC

mbreese wrote: post #224

grandalf wrote: post #204

Earlier quoted context omitted.

Sure but you are ignoring important information. The car itself has not depreciated. We are misattributing the depreciation. It's a different bundle of products. There is nothing intrinsically price-reducing about being driven one mile. The lower price is due to various market failures or trust breakdowns, not b/c the car itself has changed.

> not b/c the car itself has changed It has nothing to do with that particular car, but rather the "unknowns" about that car. It could be a very nice car in about the same condition as when it was brand new. When it is new, the car is a fixed entity. There is nothing unknown about it. Once you drive it off the lot, there is something unknown about the car - Where did you drive it? Was it in an accident? Did you drive…

I think the idea that a new car is a fixed entity is a common misconception. Unless you built it yourself, do you really know anything more about this than a used car? In either case, it is a good idea to drive it, listen carefully to the car, and look for signs of damage (contaminated fluids, etc.)

The new one may have an advantage because of the warranty, but taking advantage of the warranty can be a huge hassle.

If you just want no-hassle car ownership, it may make more sense to buy an old beater that's running good, and when it starts to give you trouble, buy another one.

Re: Kill the laws that keep car dealers in business

#263

Post by jbigelow76 » Wed, Oct 28, 2015, 6:54 PM UTC

dragontamer wrote: post #258

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…

* knowing that the dealership is trained to _only_ work on your model of car is extra assurance that they'll do it correctly.*

Semi-tangential: https://www.youtube.com/watch?v=Ii8rC6CPCvM

Re: Kill the laws that keep car dealers in business

#264

Post by Vendan » Wed, Oct 28, 2015, 6:58 PM UTC

dragontamer wrote: post #258

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 may just be that my cars are old, but the dealerships don't have parts for them. On the other hand, there's 3 auto part shops less then 10 minutes from me that have the various parts I've needed on hand and ready to go.

Re: Kill the laws that keep car dealers in business

#265

Post by xixi77 » Wed, Oct 28, 2015, 6:58 PM UTC

forgetsusername wrote: post #159

Rumford wrote: post #125

Earlier quoted context omitted.

You're probably right. For example: Even though you can buy a Thinkpad directly from Lenovo, Best Buy still exists.

> Even though you can buy a Thinkpad directly from Lenovo, Best Buy still exists For how long? It's a product an older generation that, for some reason or another, appreciates receiving the sales pitch. We're all tech savvy people here; go into Best Buy and start looking at computers. 4 out of 5 times you'll receive a sales pitch with, at least, a few elements of utter bullshit. Meanwhile, the younger generation are…

I would certainly not buy a laptop sight unseen -- you can't really evaluate things like how the keyboard/pointer device/etc. feel from a picture, or how the screen looks in sunlight, or if that 0.1" width reduction is worth it, etc.

Much more so with cars -- e.g. how would I tell whether 0.5" less elbow space is still good enough, or how good is road visibility from the driver seat (IMO the single most important characteristic of a vehicle!), or whether the plastic feels cheap, or how clear/useful the HUD is, from looking at pictures?

Thinking about it, I've picked my last car based on rear seat headrests obscuring rear visibility too much for my liking in one of the last two contenders. I wouldn't have been able to notice it without actually driving the vehicle.

Sure, there are reviews & ratings, but those reviewers are not you -- if (for example) you don't care about those headrests quite as much as I do, why should you let my opinion skew yours?

Re: Kill the laws that keep car dealers in business

#266

Post by brandonmenc » Wed, Oct 28, 2015, 6:59 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…

> Finally, while you're OK dropping the equivalent of a year's pay on a website, most people are not.

It seems to be mostly tech workers who pine for the "buy it now" experience for car shopping. They all seem to know exactly what make, model, and color they want, and they never buy used.

Everyone else has a budget, coupled with a wide range of what they consider an acceptable car - which is why test driving and "show me what else is on the lot" will always be a thing.

Re: Kill the laws that keep car dealers in business

#267

Post by unics » Wed, Oct 28, 2015, 7:03 PM UTC

AnimalMuppet wrote: post #218

venning wrote: post #132

Earlier quoted context omitted.

We often moan about the taxi industry, the hotel industry, or the dealer associations but, in doing so, we miss something very important. The players in that industry often existed for years or decades in a state of government-backed protection without realizing it . Taxi drivers didn't necessarily lobby for market restrictions; they took advantage of the oligopoly, sure, but not necessarily consciously. If you live…

Some fences need to remain. Take barbers/hairdressers, for instance. It turns out that a barbershop can be a great place for spreading head lice. You want your barber/hairdresser to be trained to prevent that. That's part of what their licensing is about. So, are there any aspects of being a car dealer that are worthwhile fences? Offhand, I can't think of any, but that doesn't mean there are none.

Licensing only provides money to a regulatory system. Health inspectors may prevent head lice but word of mouth is still the main way a business gets shut down for shoddy work.

Re: Kill the laws that keep car dealers in business

#268

Post by xixi77 » Wed, Oct 28, 2015, 7:04 PM UTC

PretzelFisch wrote: post #197

Rumford wrote: post #125

Earlier quoted context omitted.

You're probably right. For example: Even though you can buy a Thinkpad directly from Lenovo, Best Buy still exists.

Probably the better example would be even though you can buy an Iphone directly from Apple.com the Apple Store still exists.

Aren't Apple stores owned by Apple though? If they are, when you go to an Apple store to look at things and then buy online, the store owner (Apple) is still happy because it's getting paid just the same.

Re: Kill the laws that keep car dealers in business

#269

Post by amha » Wed, Oct 28, 2015, 7:06 PM UTC

If anyone hasn't heard it, there's a fantastic This American Life that follows around a bunch of employees in a car dealership for a month. It's fascinating and sad: http://www.thisamericanlife.org/radio-archives/episode/513/1...

Abstract: "We spend a month at a Jeep dealership on Long Island as they try to make their monthly sales goal: 129 cars. If they make it, they'll get a huge bonus from the manufacturer, possibly as high as $85,000 — enough to put them in the black for the month. If they don't make it, it'll be the second month in a row. So they pull out all the stops."

Re: Kill the laws that keep car dealers in business

#270

Post by fluxquanta » Wed, Oct 28, 2015, 7:07 PM UTC

unabridged wrote: post #257

fluxquanta wrote: post #164

Earlier quoted context omitted.

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.…

The "worst case scenario" is losing your entire source of income, since a working vehicle is NECESSARY to earn a living in most of the US. The people patronizing these BHPH dealerships don't have a choice in what they pay due to damaged credit, so they're forced to choose between an exorbitant interest rate on a vehicle that's marked up significantly, or no way to get to work.