# Why can't we buy an automobile from the manufacturer? **URL:** \ **Category:** Factual Questions\ **Created:** [May 12, 2014, 1:41am UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224 "2014-05-12T01:41:18Z")\ **Posts on this page:** 11\ **Page:** 3
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [May 12, 2014, 11:49pm UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/41 "2014-05-12T23:49:57Z")
> [@steronz](#): > > But the manufacturer would have no _incentive_ to eliminate any of that overhead. Or if they did, they’d have no incentive to pass that savings onto the customer. Dealers right now compete against each other, which means that if dealer A eliminates pricing obfuscation and their customers like it, dealer B would have to follow suit. Clearly pricing obfuscation isn’t a dealbreaker, which means there’s no incentive for the manufacturers to stop doing it if they were running the show. Manufacturers compete with each other as well, and have more of an incentive to keep a clean image. Dealers are highly entrenched, partly due to the law and partly for historic reasons. I don’t think one can conclude anything about their incentives based on the continued existence of dealers. Bad business models can stick around for a very long time after they become obsolete. There’s a certain amount of consumer education/training that needs to take place. I was able to get a good deal on my car because I ordered it through my dealer. I knew exactly what I wanted and what a reasonable price was. The dealer basically got a nominal delivery fee and I completely avoided the nonsense where the dealer takes you through the lot trying to upsell you on everything. That said, I suspect that a lot of people just aren’t used to going though this process and wouldn’t know what to do (it’s also only available from some manufacturers). ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [May 13, 2014, 12:16am UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/42 "2014-05-13T00:16:28Z")
> [@brickbacon](#): > > Again, dealers makes a good deal of their profits on things other than the price of the vehicle- namely servicing and financing. Another reason to avoid them (for their part, Tesla says that they aim for servicing to not be a profit center). > [@brickbacon](#): > > Regardless, that overhead would likely be there in part regardless of who sells you a car. And even if there was no overhead, manufacturers would have no reason to pass the savings on to consumers. The whole point to the dealerless model is lost if you don’t get rid of the giant inventory of cars. It’s a huge amount of land, a huge chunk of idle inventory, and a huge number of people to maintain them. It’s useless. > [@brickbacon](#): > > Why would they given they would essentially have a monopoly on their brand? What does this even mean? [Most] people don’t buy brands, they buy cars. If one manufacturer makes their cars super-expensive, people will buy some other brand. If a manufacturer was confident that they could move beyond dealers, they’d do it in a heartbeat. But it’s a huge risk since it goes against decades of conditioning. > [@brickbacon](#): > > This is nonsense. You can go onto any manufacturer’s website to find out the MSRP on almost any car configured in any way. And yet that’s almost never the price that’s actually paid… (and if you do pay that, you’re probably getting ripped off). > [@brickbacon](#): > > You can also go on to sites like True car to get a nailed down quote on a real vehicle at multiple dealers in your local area. The reason why dealers make far less money on new cars sales these days is because buyers have good pricing info. It’s definitely gotten better. Of course, the very existence of sites like that proves the point. The dealers weren’t providing good info, so third parties had to step in (and of course the dealers fight them tooth and nail). What other consumer product has anything similar? It’s still not quite good enough, though. Manufacturer incentives mean that you may not always be getting the best price. A clever consumer can pay less than cost if the dealer needs to make their quota, for instance. But the money comes from somewhere, and that somewhere is other buyers. The majority would be better off if those incentives were eliminated and people all paid the same price. > [@brickbacon](#): > > Either way, you are making the classic mistake of thinking that the price paid has to be tied to the cost of the item, or that one could use the cost to leverage a seller with a monopoly and sufficient demand. It’s not a mistake, it’s an (unrealized) ideal. In an efficient, competitive market, prices drop to not far above costs. I posit that cars are a competitive market–there are generally many options for any given price/feature-point. So it must be inefficient instead. ---
**Author:** ![brickbacon](https://avatars.discourse-cdn.com/v4/letter/b/898d66/32.png) [@brickbacon](https://boards.straightdope.com/u/brickbacon)\ **Post date:** [May 13, 2014, 1:57am UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/43 "2014-05-13T01:57:01Z")
> [@Dr.Strangelove](#): > > Another reason to avoid them (for their part, Tesla says that they aim for servicing to not be a profit center). Why does them having a different profit model make them worthy or being avoided? > [@Dr.Strangelove](#): > > The whole point to the dealerless model is lost if you don’t get rid of the giant inventory of cars. It’s a huge amount of land, a huge chunk of idle inventory, and a huge number of people to maintain them. It’s useless. Those are people with jobs that would likely no longer exist. Is it inefficient? Yes, in many respects, but that doesn’t mean the efficiency gains would be a boon for consumers. > [@Dr.Strangelove](#): > > What does this even mean? [Most] people don’t buy brands, they buy cars. This is wrong. Brand loyalty is pretty high for auto makers. The point of the comment is that right now you have competition amongst both dealers and manufacturers. Without dealers, you lose a layer of competition. Toyota would then have a monopoly on Pruises that no current dealer has. When Toyota or any other manufacturer has a sales monopoly, there is less pressure to lower prices if there is sufficient demand. For example, when I bought my car I emailed several dealers in the DC area and asked them to compete on price. Because those dealers have different incentives, inventory, etc. they come back with different prices. If there was no other place to buy my current car, then the one source would be less likely to negotiate. They would also have an upper hand because they would have more sales information to maximize profits. We are already in the age where surfing the net on an [Apple](http://online.wsj.com/news/articles/SB10001424052702304458604577488822667325882) computer might mean you get different ads with different (higher) prices. Why do you think giving Benz a monopoly will be good for consumers price-wise? Yes, I could buy another brand, but given there are usually not too many comparable vehicles within a given class, my options would be much more limited than they currently are. > [@Dr.Strangelove](#): > > If one manufacturer makes their cars super-expensive, people will buy some other brand. If a manufacturer was confident that they could move beyond dealers, they’d do it in a heartbeat. But it’s a huge risk since it goes against decades of conditioning. I think they would cut out dealers obviously. The point isn’t that Ford selling directly could raise their prices a bunch because they are monopoly. It’s that there is no reason for them to lower prices just because they save money. All eliminating dealerships will do is make manufacturers richer at the expense of jobs and tax revenue. This is “small” business vs. big business. The idea that the winner in either case will be consumers is highly unlikely. > [@Dr.Strangelove](#): > > And yet that’s almost never the price that’s actually paid… (and if you do pay that, you’re probably getting ripped off). And? the comment was a response to the idea that there is no transparency and that dealers were trying to “confuse” people. True Car and other sites will tell you nearly every cost AND the prices people in your area actually paid. > [@Dr.Strangelove](#): > > It’s definitely gotten better. Of course, the very existence of sites like that proves the point. The dealers weren’t providing good info, so third parties had to step in (and of course the dealers fight them tooth and nail). What other consumer product has anything similar? Similar to what? Most consumer products have less transparency. Do you know how much Whole Foods pays for any product they sell? How much does Walmart pay their suppliers? We have no idea what the markup is on most products. Even when the prices are negotiated, autos are fair more transparent than things like real estate, furniture, negotiating contract work, medical care, or jewelry. > [@Dr.Strangelove](#): > > But the money comes from somewhere, and that somewhere is other buyers. The majority would be better off if those incentives were eliminated and people all paid the same price. Not if that static price was more than the average paid. There is no reason to think it would be the same or less given such a scheme dissuades price sensitive customers, and doesn’t maximize profits from less price sensitive people. Even if manufacturers used online price discrimination like airlines, there is no reason to think consumers will pay less in aggregate. > [@Dr.Strangelove](#): > > It’s not a mistake, it’s an (unrealized) ideal. In an efficient, competitive market, prices drop to not far above costs. I posit that cars are a competitive market–there are generally many options for any given price/feature-point. So it must be inefficient instead. You are wrong. It’s not really a particularly competitive market in many places. How many cars are actually comparable to a Audi A7 in terms of features, design, and price? A few, but even they are not direct substitutes. Yes, there are obvious inefficiencies, but that doesn’t mean eliminating those inefficiencies benefits consumers any more than Ford automating more jobs makes their cars cheaper. They generally charge what the market will bear. Prices might get cheaper, but they just as likely might get more expensive. Given the almost certain job losses and tax base reduction, I don’t know what any local government would be jumping at the chance to change laws to allow dealers to be cutout. ---
**Author:** ![Rick](https://avatars.discourse-cdn.com/v4/letter/r/9f8e36/32.png) [@Rick](https://boards.straightdope.com/u/Rick)\ **Post date:** [May 13, 2014, 3:22am UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/44 "2014-05-13T03:22:44Z")
[quote=“Amateur\_Barbarian, post:33, topic:688224”] This is the fourth or fifth thread on this topic in a month or so, and the composite answer was clear hundreds of posts ago - to me, at least. [LIST=1] [li]Cars cannot be sold directly by manufacturers because of laws dating to the 1940s, strenuously supported and enforced by the layer that benefits from the situation: car dealers.[/li][li]The difference between a Ford-run sales outlet and an “independent dealer” would be the same as the difference between a “company” McDonald’s and an independent franchisee’s: **next to none except that the company-run store would likely be better-** [/li][/QUOTE] (Building mine) Bwahahahahahahahahaha You have never worked for Ford Motor Company I see. As a member of senior management at a dealership I know exactly how much money is made on new car sales. Frankly the profit on the front end (sale price vs cost) is often shockingly low. ---
**Author:** ![deregulated](https://avatars.discourse-cdn.com/v4/letter/d/7bcc69/32.png) [@deregulated](https://boards.straightdope.com/u/deregulated)\ **Post date:** [May 13, 2014, 3:37am UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/45 "2014-05-13T03:37:03Z")
I know, issue everyone a Tesla, take all the combustion vehicles off the road, and forget about all the negotiating and pricing, and breath easier. ---
**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\ **Post date:** [May 13, 2014, 2:27pm UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/46 "2014-05-13T14:27:41Z")
Tesla’s having the same fight in Missouri. Here’s a[relevant editorial](http://www.stltoday.com/news/opinion/columns/the-platform/editorial-tesla-gets-lesson-in-missouri-lawmaking/article_803e3ab3-e1ae-512e-8d49-e82adc7dddaf.html), but the key is this sentence: > [@](#): > > The state determined that the franchise law, which is intended to protect local businesses from unfair competition from the manufacturers themselves, doesn’t apply because Tesla doesn’t use franchises. So in Missouri, if a manufacturer uses franchises (in the old days they were called “agents”) to sell and distribute its product, then it can’t ALSO distribute the product directly, because that would be unfair competition with its own franchises. IANAL but I’m guessing in some other states some form of the franchise law was written to explicity require auto manufacturers to use franchise agents. After all, you can’t go to Detroit and buy a car directly from Ford, you can’t go to Tennessee and buy a car directly from Nissan, you can’t go to Kentucky and buy a car directly from Toyota, even though there are manuracturing facilities there. ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [May 13, 2014, 3:23pm UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/47 "2014-05-13T15:23:26Z")
> [@deregulated](#): > > I know, issue everyone a Tesla, take all the combustion vehicles off the road, and forget about all the negotiating and pricing, and breath easier. Great idea comrade. Let’s nationalize everything, that way we all get everything we want. Also, you get the award for **worst** username and post combo. ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [May 15, 2014, 2:53pm UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/48 "2014-05-15T14:53:44Z")
> [@Rick](#): > > (Building mine) > Bwahahahahahahahahaha > You have never worked for Ford Motor Company I see. > > As a member of senior management at a dealership\*\* I know exactly how much money is made on new car sales. \*\* > Frankly the profit on the front end (sale price vs cost) is often shockingly low. Can you tell us? ---
**Author:** ![Morgenstern](https://avatars.discourse-cdn.com/v4/letter/m/f9ae1b/32.png) [@Morgenstern](https://boards.straightdope.com/u/Morgenstern)\ **Post date:** [May 15, 2014, 3:44pm UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/49 "2014-05-15T15:44:53Z")
> [@Mdcastle](#): > > Probably the same reason you can’t buy Frosted Flakes direct from Kellogg’s. Car manufacturers know how to make cars, not sell them to individuals, (and most people want to test drive a car and see an assortment before making a purchase). It wasn’t all that many years ago that you could buy directly from the manufacturer. In fact, military returning from overseas could pick up their car from the dock or factory, depending on whether it was domestic or imported. In fact, If I understand the program correctly, some of the COPO Chevrolet cars were, and are purchased frrom the manufacturer, not the dealers. ---
**Author:** ![GreasyJack](https://avatars.discourse-cdn.com/v4/letter/g/df705f/32.png) [@GreasyJack](https://boards.straightdope.com/u/GreasyJack)\ **Post date:** [May 15, 2014, 4:22pm UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/50 "2014-05-15T16:22:34Z")
> [@Morgenstern](#): > > It wasn’t all that many years ago that you could buy directly from the manufacturer. In fact, military returning from overseas could pick up their car from the dock or factory, depending on whether it was domestic or imported. > > In fact, If I understand the program correctly, some of the COPO Chevrolet cars were, and are purchased frrom the manufacturer, not the dealers. As mentioned above, with the factory (and I assume dockside) pickup orders the paperwork and actual exchange of money still had to go through a dealership. Ditto with the COPOs. The deal there is that GM allowed dealers to order batches of cars with options combinations that normally weren’t allowed. This was normally for fleet sales where a fleet buyer would want a weird color or, say, power brakes and steering but no radio or heater or something like that. Some enterprising dealers realized they could get around the limits GM put on the number of high-performance muscle cars they’d give to dealers by ordering a batch of essentially the same cars through the COPO program. So, for example, instead of getting one of the limited Nova SS’s GM doled out, they could just order a batch of normal-badged Novas with the same big engine and go-fast gear as the SS. Somewhat ironically, because only a certain number of them sneaked by before GM figured out what was going on and put the kibosh on it, these days they’re actually sometimes rarer and more valuable than the genuine versions of the cars they were emulating. But, back to the thread, the program was still done through dealers. ---
**Author:** ![Rick](https://avatars.discourse-cdn.com/v4/letter/r/9f8e36/32.png) [@Rick](https://boards.straightdope.com/u/Rick)\ **Post date:** [May 15, 2014, 11:14pm UTC](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224/51 "2014-05-15T23:14:26Z")
> [@Honesty](#): > > Can you tell us? Average front end gross profit at my Hyundai dealership ran $800-1,000 per car. This sounds like a lot, but percentage wise it isn’t a whole lot. [Previous page](https://boards.straightdope.com/t/why-cant-we-buy-an-automobile-from-the-manufacturer/688224.md?page=2)