The current, old 20th century way of buying a car will vanish by 2025.
The car dealer franchise system will disappear and all makes of cars will be sold online and directly by manufacturers through manufacturer-owned stores like Apple and Tesla operate today. The manufacturers will also provide service and make new models available for display and demonstration drives.
The reason for this is the exponential acceleration of education and knowledge of the consumer, driven largely by the Internet. Perennially car dealers have ranked at or near the bottom of the Gallup “Honesty and Ethics” in Professions poll. The modern, educated consumer will no longer tolerate the treatment they must endure to buy a car. The only reason franchised car dealerships exist today is because of state franchise laws, lobbied in by car dealers and their associations, which entrench car dealerships under state laws and prevent manufacturers from selling cars directly.
Public sentiment overwhelmingly supports buying cars directly from the manufacturer through factory owned stores and it’s only a matter of time before politicians will be forced to comply with public sentiment.
Of course, I hope I’m wrong about this forecast, but wishing it won’t happen does not change the inevitable. I do believe there is some chance that car dealers can mend their ways and this is why every year I offer these Ten New Year’s Resolutions.
- Eliminate your dealer fee. This pure profit to the dealer is added to the price of the cars you advertise and the prices your salesmen quote your customers. The average dealer fee is approaching $1,000 and this is the average of how much you deliberately understate your true selling prices.
- Eliminate the fine print in your TV, newspaper, digital and all advertising which significantly increases the true price of your advertised cars. You commonly add “dealer installed accessories”. You also reduce your advertised prices by discounts most can’t qualify for, such as college graduate, active military, farmer, current owner of the same make car, etc.
- Don’t inflate the MSRP of the new cars you sell with “addendum stickers” that add overpriced accessories like nitrogen in the tires, glass-etch, and pin stripes. You than advertise discounts from “dealer list” or just “list price”, tricking the buyer into believing she’s getting a larger discount.
- Eliminate the haggle and hassle pricing game. Put the real, out-the-door price on the cars you sell. No other retailer plays the games you play with their customers.
- Eliminate Bait and Switch advertising. Always have the advertised cars in your inventory and, if you run out, give your customers a rain check for when you can obtain them.
- Don’t lure your customers in with inflated price offers for their used car. Making them think you desperately need their particular car when you want only to sell them a new car is simply unethical. This applies to all other forms of “get ‘em in-the-door by any means necessary’ advertising.
- Don’t over mark up the interest rates to unsuspecting, unsophisticated customers. You are well aware that most customers can obtain lower interest rates directly from their credit unions and banks.
- Don’t switch customers from a purchase to a lease for the purposes of secretly increasing the price and your profit. By focusing on the lower payments that leases offer, you trick your customer into not taking into account that she builds no equity with her lease payments.
- Stop advertising that you can finance people with bad and no credit. You make these false promises because when you “cast that advertising net of false hope”, you catch a few unsuspecting victims whose credit isn’t as bad as they thought it to be. But most of those you drag into your dealership cannot be financed. These are treated unsympathetically and without respect. They are often told that you “will get back to them” but you never do.
- Eliminate the yo-yo delivery which is also known as the “spot” and puppy dog” delivery. Americans fall in love with their automobiles and they often buy on emotion. You exploit this weakness by encouraging buyers to drive their purchased car home the same day they “fall in love” with their new car. You also trick customers into believing that they qualify for better interest rates and terms than they really do. But, after taking their car home and bragging to their friends and neighbors, you often call them to say the interest rate, monthly payment and down payment are much higher than you promised.