gengar

Exactly. And that's what's so curious about those arguing that if manufacturers could sell direct to consumer, prices would rise. If people actually believe dealers lower prices for consumers, then they shouldn't care whether manufacturers can sell direct to consumer.

Toys4RJill

Then there is no competition. Competition is what allows the prices to fall.

Tesla really is not that great of an example on anything, the demand for Tesla models far exceeds the supply. This is why people are paying the prices Tesla wants.

Toys4RJill

No you cannot. Some states say you cannot have dealers supply customers. While other states say that you can either or but not both. An independent dealer selling Chevrolets will not stay in business for long if the next dealer over is a Chevrolet location selling direct from Chevrolet.

pvmike1

There are only a handful of dealerships that I'll deal with. Most are useless. The same can be said about realtors as well; that's the natural result of a career with a low barrier for entry.

Many people in and out of the auto industry believe that US Buick will go under before Tesla...

mmarshall

In general, it makes for too much overhead. In the auto industry, company-owned retail outlets have never worked in the long run for any manufacturer, and there's a good chance they won't at Tesla, either.

FatherTo1

Tesla's model of selling direct certainly is interesting. I don't really know which direction prices would go if dealers disappeared. There are many compelling points made so far in this thread.

On the one hand, Amazon has demonstrated how removing the overhead of brick and mortar stores allows it to sell directly to consumers at a lower price. But, ironically, many shoppers rely on the brick and mortar stores to experience and "test out" products before ultimately buying for less from Amazon. I have been guilty of this many times over. In this case, the local stores provided a value but lost the transaction. If these brick and mortar stores go out of business then I would still buy on Amazon, for the same Amazon price -- so the price didn't change, but Amazon isn't exactly a manufacturer per se and is just a better "dealer" maybe.

Then, on the other hand, if you eliminate dealerships and manufacturers have to take on all of the servicing and maintenance then wouldn't that drive up the MSRP of cars? Or would service be an entirely separate entity/business that the manufacturer controls? Doesn't Tesla do their own servicing (which currently requires appointments months in advance)? If a manufacturer was vertically integrated and owned/controlled every facet of car design, manufacturing, distribution, marketing, selling, finance, etc. (such as eyeware/sunglass companies or De beers in diamonds), then I can see potential for the manufacturer to reduce costs and sell at a lower price, but would they really do it or would they hold onto the extra profits?

I really don't know which way car prices would go. What would be the incentive for manufacturers to lower the MSRP? I don't know enough to hazard a guess and am just pondering aloud. Without dealers, manufacturers can just as easily justify the same, or higher MSRP, by saying the manufacturer now has to incur additional expense setting up showrooms or leasing space or insuring their inventory or taking on responsibilities/offering services that they didn't have before. True that the manufacturer no longer needs to provide factory incentives or rebates to dealers to move inventory but now the manufacturer has to take on the task of managing inventory. So, in the end, the price of the car may not change much at all except that the line item costs just get shuffled from one provider to another.

Edit: Completely off-topic, but after using a travel agent twice to book a few cruises I learned I can, and do, do it better myself. No surprise that the travel agency we used has since gone out of business. I can get the same brochures online and can get the same deals, as well as put together better packages and plane fares. Sometimes you'll get better airfare, or better flight times, if you just do one-way tickets instead of roundtrip. On the topic of real estate agents, a few relatives have their license but they got into the profession for the wrong reasons. A friend of ours is serious about her real estate business and sells $10M+ in properties annually. She is a real estate broker with a big team that helps with every aspect of the process (listing, staging, finance, escrow, etc.). We trust her and feel that she does bring respectability to the profession. That said, 6% is pretty excessive. I understand that it can end up being split so many ways between buyer's agent, seller's agent, broker, agent, etc., but still. I didn't know in other countries it is 1-2%. That sounds more reasonable but maybe the expectations are different or the laws. We will definitely use the services of our friend when we go house hunting in the future, but it did seem odd how we were actually the ones that found our current home (new construction build) and, by her simply accompanying us to see the model homes, she was entitled to 3% of the home price! Of course, it didn't cost us anything extra but she basically got a nice lump sum, from the builder/seller, for simply showing up. I initially wondered why she was so eager to come with us that day. Next time I'll just take my brother to view model homes and split the proceeds with him.

bitkahuna

iTrader: (20)

thank you

just because you'd pay the same price to the agent as to disney doesn't mean it's not costing you anything. disney values travel agents who can steer clients to them and so won't undercut them, instead artificially keeping prices higher so there's margin to give to agents to keep them happy. see how that works.

back to cars and dealers, it's why car MSRP's are stupid, because only the stupid pay it, but they're necessary so the dealer has lots of negotiating room. meanwhile, the dealer not only pays the car maker much less than msrp of course, but the dealer gets many more 'kickbacks' before, during and after the sale, which must be factored into what the dealer and consumer pay to make 'everyone happy'. without the dealer a ton of fees would go away.

those who say that would just allow the manufacturers to keep prices higher and just make more profit have it wrong because manufacturers aren't monopolies, they compete, and would still do so.

that's wrong too, because it's ILLEGAL to do that. apple's brand is strong enough and frankly because it's such a niche product (non-phones anyway) with so few retailers that there's not much competition. but it's mostly about brand strength, people are willing to pay almost any price for apple and the few dealers know it and so don't discount. best buy for example, no doubt makes a lot of money off apple products and only has small, occasional discounts. meanwhile in the windows/pc aisle, it's a blood bath.

agreed.

bitkahuna

iTrader: (20)

but retailers have fought back, now offering price matching to online stores. best buy does, target does, and i expect just about any retailer does these days, so i don't mind buying at best buy.

FatherTo1

Oh that's right, good point! I think the last time I stepped in a Best Buy was 2008 when I was comparing HDTVs (which is difficult to actually do since all the TV settings are turned up to max for intense brightness and not calibrated for proper picture quality). Had to check just now on Google Maps to see if our local Best Buys are still around, and they are. They just don't come to mind anymore when I need electronics or appliances. Usually go to Lowes/Home Depot, Costco (for the return policy), or beloved Amazon. I have had two same-day orders from Amazon arrive in 3 hours one time and 5 hours another time, from the moment I clicked checkout! Sorry, got too carried away on a tangent there. Good point, bitkahuna!

gengar

Customers would still have to pay for service/maintenance, so not sure why that would affect the MSRP. Also, note that dealers make far more from service than sales, so it's actually the case that service subsidizes car sales.

As a side note, I've long been a proponent of separating the sales and service functions at dealerships - showrooms and car inventory lots are a huge waste of real estate and are one of the reasons that they're often inconveniently located off in the boonies. Smaller service centers could be located more conveniently for customers, and for the reasons mentioned above, likely better priced as well.

SW17LS

Statistics don't back that up. Overwhelmingly houses sold by owners on their own sell for less, and more than 6% less. It's not just about sales price either, these transactions can be complicated today and have lots of pitfalls and twists and turns, getting it to settlement often requires skill and experience. I'm 110% confident in my value, as are my hundreds of satisfied clients.

Being in the business myself, I wouldn't even do it myself I would hire a colleague to list my house for me and pay them. That's the honest truth, and I've done that.

Also so you know, your listing agent doesn't keep 6%, half of that is put into the system as compensation for an agent who represents a buyer. The average in most markets is also not 6%, in my market it's more like 5%. In England the business works differently, the seller doesn't pay both sides. So in the US it's .5% more expensive...

As for title insurance, anybody who doesn't buy title insurance is a fool. I see title defects and title insurance claims all the time. I personally would never buy a house without title insurance.

mmarshall

Agreed. With maybe a few exceptions here and there, manufacturers can't just set prices anywhere and assume their products will sell, profit or not. The ultimate authority is still in the hands of the consumer...he or she can simply choose not buy it at that price, period.

Of course, sometimes there are good reasons why pricing and sales-policies are set where they are. Take Saturn in the 1990s, IMO still one of the best examples....before GM's notoriously inept management screwed it up. First, customers were willing (and, indeed, waiting in line) to pay full-MSRP. Second, the cars had several unique features on them which were largely unavailable anywhere else. Third, even at list, the S-series cars were still competitively-priced with many of their competitors. Fourth, the cars were basically reliable....unlike the rest of GM at that time. Fifth, the MSRP included several customer perks that were virtually unheard of at the time, like a 30-day money back guarantee if not completely satisfied, and hand-washing for all cars brought in for service. (indeed, I got a sixth perk...they let me wash my own SL-2 there, in the clean-up bay, because I didn't trust the PDI guys to do it without scratching LOL)

A good store overall....though I don't think very much of their Geek Squad computer-maintenance, and prefer to use Apples's own system for that. Still, I got the Mac-Air that I'm using right now for a pretty good price (for an Apple)....and a trade-in on my old Sony VAIO.

Best Buy also seems to have much better customer service than Wal-mart. Nobody at Wal-mart seems to know where anything in the store is, plus many of them can't even speak English. (fortunately, I can speak some Spanish...but not terribly fluently)

FatherTo1

Steve, I don't understand the above part of your post. If you're good at what you do, then why bother to let someone else handle it? Unless there are laws prohibiting a realtor from listing their own home, if one has the knowledge, expertise, and wherewithal to DIY, then why not? I understand sometimes we don't have time to DIY with car maintenance but, in the case of selling or purchasing property, seems it would be right up your alley.

SW17LS

Because advising other people on important matters effectively and advising yourself effectively are two different things. Its the same reason attorneys shouldn't represent themselves, accountants shouldn't do their own taxes, doctors shouldn't diagnose or treat themselves or their family members, wealth managers shouldn't manage their own assets, etc.

Its very difficult to be objective when you're dealing with your own interests. A lot of what I do involves making people understand realities that they don't want to understand. Everybody thinks their house is the best, and it has the best features, and why would anybody want to change anything. I walk into people's homes every day and tell them "In order to maximize value you need to do this, this, replace this, redo this and this is what we will get" and "what we will get" is almost always less than they want. If they don't listen, they'll come on too high and it won't show as well as it could have and that will cost them money...I as a consumer am not immune to that, I need somebody else to tell me when I'm being a dodo. I need somebody else to tell me when buying something may not make sense, or when choosing not to buy something may not make sense.

It does go both ways too, many times I see people undercutting their own property, thinking they have to do more than they have to do when in reality they can do less and make more. Its not typically that way but it does happen lol.

Buying maybe, but selling for sure I would have a colleague do it for me. Even buying though, am I as committed to being objective about houses needs in terms of repairs and marketability down the line when I'm invested in getting the house I've decided I wanted? I don't see how. I talk people out of doing stuff that they want to do every day.

Totally different than choosing to DIY a repair on your car.

patgilm

My point with the travel agent is that whether I pay Disney directly or pay the agent, the price is the same only I am getting the agent to do all of the work for me booking things to get me the lowest price. We are going on the Disney Cruise this year and some agencies give you a $250 credit to use on the cruise and you cannot get that booking with Disney yourself.

As it relates to manufacturers, I feel that any time I try to buy through a manufacturer I have to pay retail with no discounts. When I buy through a retailer, I almost always get discounts. For example, I bought a Rolex for my wife a couple months ago, I could go to a Rolex store and they wouldn't give me a discount. I went through an authorized jeweler and got 15% off. Would this not be the same with auto manufacturers?