tesla's real impact - breaking the car dealer monopoly
07-10-17, 08:04 AM
#61
Let us use the Idea of buying in bulk for a moment. I remember when the ECU tune for the ISF was released and the manufacturer was willing to discount the price if they get a group buy. Same Idea. Lexus released the MSRP for the GSF to be almost $80,000, after few months you have dealers selling the car for $65,000. Do you really think that the dealer bought the car for $80,000 and because its not selling they are willing to take a loss of almost $15,000. There must have been a serious discount from the manufacturer to the dealer for buying in bulk.
Also, How many people on these thread have had to trade in a car? Do you think that would be possible when dealing with the manufacturer directly?
How many people have had an unplanned visit to the dealership due to a problem that was not expected? Imagine if you have to schedule an appointment for those problems
some of these headaches that dealers have to deal with that the manufacturers don't have to deal with, is enough reason for the manufacturer to give the dealers a discount when they buy the cars.
It's a good assumption that when buying directly from the manufacturer you save money. But, IMO I don't think that logic plays perfectly into the business of selling cars.
Also, How many people on these thread have had to trade in a car? Do you think that would be possible when dealing with the manufacturer directly?
How many people have had an unplanned visit to the dealership due to a problem that was not expected? Imagine if you have to schedule an appointment for those problems
some of these headaches that dealers have to deal with that the manufacturers don't have to deal with, is enough reason for the manufacturer to give the dealers a discount when they buy the cars.
It's a good assumption that when buying directly from the manufacturer you save money. But, IMO I don't think that logic plays perfectly into the business of selling cars.
07-10-17, 08:07 AM
#62
Lead Lap
I used to think title insurance was stupid...until my father's friend bought a house and had title issues as the builder of the development disappeared and didn't have all their ducks in a row. They could have been screwed and lost their home without title insurance. While it is rare, things happen and it is pretty cheap insurance in case there are issues.
07-10-17, 08:16 AM
#63
Lead Lap
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?
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?
As it relates to auto dealers and service, if dealers were eliminated I wonder how manufacturers would deal with warranty work. At least now with dealers they will usually push the manufacturers to fix something and fight for the customer when the manufacturers initially deny something. Do I really want to be the one dealing with the manufacturer directly? Manufacturers are not a whole lot better in their practices than dealers so it is a double edged sword IMO.
07-10-17, 08:20 AM
#64
This dealership model needs to die for the better of the customer. Why cant i go buy a car like I can buy something off amazon? What makes cars so special?
Last edited by 4TehNguyen; 07-10-17 at 08:25 AM.
07-10-17, 08:28 AM
#65
Racer
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.
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.
07-10-17, 08:30 AM
#66
Lexus Fanatic
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?
I used to think title insurance was stupid...until my father's friend bought a house and had title issues as the builder of the development disappeared and didn't have all their ducks in a row. They could have been screwed and lost their home without title insurance. While it is rare, things happen and it is pretty cheap insurance in case there are issues.
In any event if you want a loan, gotta at least buy the lender title insurance or they won't give you the loan.
Originally Posted by 4TehNguyen
This dealership model needs to die for the better of the customer. Why cant i go buy a car like I can buy something off amazon? What makes cars so special?
Last edited by SW17LS; 07-10-17 at 08:38 AM.
07-10-17, 08:31 AM
#67
Lexus Champion
My educated guess as to why automaker-owned retail channels do not do well is NOT because the automakers cannot manage them, it is because of the intense political pressure imposed by the "free marketers" who do not like to see automaker-owned stores.
07-10-17, 08:53 AM
#68
Lexus Fanatic
Thread Starter
iTrader: (20)
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.
but i get your point.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.
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?
the current model of car dealing is incredibly inefficient. Manufacturers over produce cars that rot on dealer lots and customers end up paying for it. No other industry works like this. If you go buy a household appliance you look at a display model, order it, it comes from a warehouse. Imagine a store where they kept 100 $1000 washing machines sitting around like a dealership does, what a gigantic waste of resources, and that costs money. How much extra cost is built into each car to support the overhead of many of these cars rotting on a dealership lot? If a dealership just had display models and not stockpiling all these cars that sit around for months, it would be a lot cheaper for everyone. This overproduction of cars is what causes cars to depreciate rapidly as well. If just enough cars were made to satisfy demand you wouldn't have cars tanking by 20% when you drive it off the lot. It tanks because its overproduced and dealers have to discount them heavily to move them. Also why can dealerships treat customers like crap and get away with it, there is no competition.
This dealership model needs to die for the better of the customer. Why cant i go buy a car like I can buy something off amazon? What makes cars so special?
This dealership model needs to die for the better of the customer. Why cant i go buy a car like I can buy something off amazon? What makes cars so special?
it's really so simple. 
LOL. Who do you think Amazon is in this scenario? The dealer. Amazon is the third party lol, you aren't buying direct.
07-10-17, 08:54 AM
#69
Lexus Fanatic
Thread Starter
iTrader: (20)
5 pages of posts in one day, not too shabby team.
07-10-17, 09:03 AM
#70
Lexus Fanatic
you're paying for the $250 credit one way or another. it's a shell game and the more middle people that are eliminated, the better it is for the consumer. back on cars, there's a giant 'distributor' for toyota/lexus in the southeastern u.s., and i believe they offer no value other than to manipulate and constrain inventory and ensure prices are higher than they need to be.
didn't say or mean to imply otherwise. but it is ludicrously overpriced.
07-10-17, 09:34 AM
#71
Lead Lap
If Lexus removes their dealership model, and sells direct, why would any executive decide to sell their product for less? I`d say stick to msrp at the point and justify it as a reason behind the hassle free experience right?
07-10-17, 09:41 AM
#72
Lexus Fanatic
Thread Starter
iTrader: (20)
no, i don't. how is it totally different? plus i do think most accountants do their own taxes.
not a flaw at all. not sure how you figure the $250 comes out of the agent's commission - ultimately the consumer is paying all costs to whatever parties.
price from disney to consumer: $1000 - disney's cost, say $500. profit: $500
price from agent to consumer: $1000 w/ $250 'credit' from disney. agent gets say $100 commission and disney's cost of the 'credit' is, say $100. disney's cost: $500+$100+$100 or $700 profit: $300.
if there was no agent example:
price from disney: $900 with $250 credit - disney's cost $600, profit: $300
so without an agent the consumer can pay $100 less and get the credit still... it's a no brainer.
but people will always believe that the middleperson got them a better 'deal' when it's a trick.
But he could have booked the cruise through Disney directly and not gotten the $250 credit. The $250 credit is paid out of the travel agent's commission, if Disney sells the trip direct, they pocket the commission they don't give it to you is the point. Thats the flaw in your logic.
price from disney to consumer: $1000 - disney's cost, say $500. profit: $500
price from agent to consumer: $1000 w/ $250 'credit' from disney. agent gets say $100 commission and disney's cost of the 'credit' is, say $100. disney's cost: $500+$100+$100 or $700 profit: $300.
if there was no agent example:
price from disney: $900 with $250 credit - disney's cost $600, profit: $300
so without an agent the consumer can pay $100 less and get the credit still... it's a no brainer.
but people will always believe that the middleperson got them a better 'deal' when it's a trick.
07-10-17, 10:25 AM
#73
Lexus Fanatic
Originally Posted by bitkahuna
no, i don't. how is it totally different? plus i do think most accountants do their own taxes.not
You said yourself you see my point so don't pretend you don't now.
a flaw at all. not sure how you figure the $250 comes out of the agent's commission - ultimately the consumer is paying all costs to whatever parties.
price from disney to consumer: $1000 - disney's cost, say $500. profit: $500
price from agent to consumer: $1000 w/ $250 'credit' from disney. agent gets say $100 commission and disney's cost of the 'credit' is, say $100. disney's cost: $500+$100+$100 or $700 profit: $300.
if there was no agent example:
price from disney: $900 with $250 credit - disney's cost $600, profit: $300
so without an agent the consumer can pay $100 less and get the credit still... it's a no brainer.
but people will always believe that the middleperson got them a better 'deal' when it's a trick.
price from disney to consumer: $1000 - disney's cost, say $500. profit: $500
price from agent to consumer: $1000 w/ $250 'credit' from disney. agent gets say $100 commission and disney's cost of the 'credit' is, say $100. disney's cost: $500+$100+$100 or $700 profit: $300.
if there was no agent example:
price from disney: $900 with $250 credit - disney's cost $600, profit: $300
so without an agent the consumer can pay $100 less and get the credit still... it's a no brainer.
but people will always believe that the middleperson got them a better 'deal' when it's a trick.
The travel agent gives up part of their commission to get the consumer to buy the trip from them and not book it directly from Disney, consumer benefits from the agent being there because they get the $250 credit. Disney could compete with the travel agent, but they choose not to.
Last edited by SW17LS; 07-10-17 at 10:29 AM.
07-10-17, 11:14 AM
#74
Lexus Fanatic
the current model of car dealing is incredibly inefficient. Manufacturers over produce cars that rot on dealer lots and customers end up paying for it. No other industry works like this. If you go buy a household appliance you look at a display model, order it, it comes from a warehouse. Imagine a store where they kept 100 $1000 washing machines sitting around like a dealership does, what a gigantic waste of resources, and that costs money. How much extra cost is built into each car to support the overhead of many of these cars rotting on a dealership lot? If a dealership just had display models and not stockpiling all these cars that sit around for months, it would be a lot cheaper for everyone. This overproduction of cars is what causes cars to depreciate rapidly as well. If just enough cars were made to satisfy demand you wouldn't have cars tanking by 20% when you drive it off the lot. It tanks because its overproduced and dealers have to discount them heavily to move them. Also why can dealerships treat customers like crap and get away with it, there is no competition.
This dealership model needs to die for the better of the customer. Why cant i go buy a car like I can buy something off amazon? What makes cars so special?
This dealership model needs to die for the better of the customer. Why cant i go buy a car like I can buy something off amazon? What makes cars so special?
If you were to go with your washing machine idea, and if people were to order there car and then the cad cam via the factory, the less cars would get sold and prices would increase. Car manufacturers make enough cars to satisfy the demand, reduce the supply and the prices go up.
07-10-17, 11:35 AM
#75
Lexus Fanatic
My educated guess as to why automaker-owned retail channels do not do well is NOT because the automakers cannot manage them, it is because of the intense political pressure imposed by the "free marketers" who do not like to see automaker-owned stores.
, but the fact is that they have never succeeded in the long run under company ownership. I agree with you that mismanagement may be part of the problem, but adding that overhead with company-owned stores certainly does not help the manufacturer any.
Last edited by mmarshall; 07-10-17 at 11:41 AM.