Ford CEO Had Enough: Dealers Raising Prices Need to Stop or Else [video]
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For most households buying a vehicle is their second largest purchase. It is meant to be enjoyable/fun. But dealerships have managed to make it very unfun/stressful/bad.
And there's always "but what if you find the unicorn dealership?!" but frankly those are few and far between. If you talk to random people in the street 9/10 will have a negative dealership story.
Dealerships do nothing to control price increases, and suggesting they do misunderstands the market forces. What controls prices is competition (i.e. other vehicles, from other manufacturers). All dealerships do is rent-seek in the middle.
I'd like to know that if my next door neighbor and I buy the same vehicle, that we paid the same price, and had the same experience. Just open up "show rooms" that don't sell vehicles, then a website where you can order for home delivery for a fixed price.
The whole "local jobs" argument would have more merit if dealerships weren't a toxic influence on local politics, and nobody is suggesting that manufacturers won't need to continue to offer local repair facilities for recalls and of course to staff these showrooms.
I'd prefer to go to a showroom, test drive, not be hassled because there's no commission on the line. Then go do that at several other manufacture's showrooms, then go home and make my final selection in peace with a web browser and my spouse.
If this system becomes efficient there's no reason why the manufacturer cannot have an interstate warehouse Amazon style with some "next day delivery" vehicles. So you can either pick your bespoke configuration and wait [period] or get something in inventory for almost immediate delivery, but in both cases you're ordering via your browser/phone.
Now instead of shopping each state dealership's inventory one by one, you're shopping all collective dealership's inventory together and getting an incredible buying experience.
I do not expect to get any of that with a new car, or even one made in the last couple of decades. That is why I will continue to maintain vehicles that were made before the turn of the century.
Dealerships are a direct result of our Federal Government stepping in to protect consumers.
Vehicle manufacturers, before dealerships, would setup a lot to sell vehicles and then disappear several months later leaving citizens on the hook to attempt to resolve damages, repairs, or warranty issues.
The US Federal Government had enough complaints from citizens across the country to propose dealerships as a resolution. These car lots would become responsible for repair and warranty issues directly acting in the place of manufacturers.
In order to remove dealerships, one must first propose a valid remedy for these issues that dealerships are currently liable for.
Ford in my experience is especially bad about making poorly engineered low-mid tier vehicles that require consumer recalls, lawsuits, etc.
They would benefit greatly from a reduced dealership presence without a corresponding decrease in sales volume.
So I went to buy a car urgently...
It was my first time buying a car by myself, the one that was totalled was a "hand me down" I purchased from a relative.
Dealerships were a nightmare. New cars sucked and were ludicrously expensive. I found out some older cars were good for reasonable prices, and went looked for one.
One dealership had a google review about how they allowed a car for servicing get stolen and didn't notice until police shown up to return the car. That same dealership tried to sell me a car that was obviously repainted in a shoddy manner and had literally misaligned parts while claiming the car never was crashed. And later a private seller complained to me unprompted that the same dealership despite being the official leadership or his vehicle, put the wrong oil in it.
Another dealership had very pushy people that didn't listen and kept attempting to sell me weak cars (0.8 liter 3 cylinder) when I kept explaining my house was on a giant hill and I had more powerful cars stall on it before.
Another one said some parts for the potential car were imported and expensive and I wouldn't want them when I asked the price... instead of just telling me the price. (I ended wanting the parts anyway, from another store obviously)
What that tipping/inflection point is, I haven’t done the math. Smaller dealerships or those at the margins of course will be the first to close or sell out to mega corp dealer chains.
Carmax is pretty decent for new car sales where they’re able to offer that, in my experience, and their used car buying experience is very good as well (have bought a handful of used cars from Carmax). Cannot speak to Carvana, haven’t used them.
Carmax is a good service but it does not sell new cars, only used cars.
While Texas’ protectionism of its dealers is definitely a bummer, it’s trivial to work around.
Honestly I think this is sadly untrue. The corruption is there, just hidden very very well and legalized in the form of political lobbying and wall st. hedge funds.
Carvana "guaranteed" offers are not guaranteed. Dealers don't respect them. It's essentially clickbait that dealers put out to get leads.
Carvana is a search engine and nothing more. The offer numbers are entirely fictional. I was unable to get dealers to honor them even under threat of legal action for false advertising.
The only companies trying to work around dealers are Carmax and Tesla.
My experience with them was incredible - I picked out the car and paid for it online and they brought it on a truck at exactly the agreed time. The whole purchase took 20 minutes of my time, including delivery. When they delivery person started to explain the car's features, I said I was familiar with the model as I had rented it before and researched it. He said great, he'll leave me to it. The price charged was exact, to the cent. The car's condition was exactly as shown online.
Hopefully those types of start-ups will be successful and will become more popular. It was exactly what I wish all car buying was like.
My past experiences buying cars in the US from dealerships was always a nightmare. Even if you walk in with cash to buy a specific car, it was always somehow a 4+ hour process with all the hoops they make you jump through and all the add-ons they try to tack on.
That would be a complete game changer. I would pay a premium for that.
The company discount is why dealers around Detroit are amongst the richest in their communities.
https://www.nytimes.com/2022/05/14/opinion/sunday/rich-happi...
Enterprise Resource Planning apparently, not Erotic Role-Play.
The current car market is making me regret no picking up another cool car in the late 10s. So many great options were on the market for well under MSRP: GT350s, base C7s, 1LE camaros, pre-refresh ND Miatas. Those same cars are probably selling for well over purchase price now, with 50k miles on them.
So far, south Florida is a basket case and almost every dealer is charging huge markups.
A lot of people wanted this, so dealers in my local area were marking up and adding dealer fees WAAAAAAAY in excess of MSRP. We aren't talking 2-3k we are talking 10-20k. When I pushed back, the dealer was happy for me to walk as there was a line of people wanting it after me.
My wife and I have only owned ford vehicles. Bought my first Toyota. I won't be back.
The dealership wanted 20k over NEW MSRP on a USED model.
Personally I buy used cars because I drive once a week and if you have friends with car repair skills maintenance is pretty cheap. That will soon change though and may never come back as cars will be locked down more (without actually having gained any significant functions as self driving is out of reach).
Efficiency got better though. A new car today might indeed use 30% less gasoline compared to a 15 year old car. Don't know how diesel compares but that seems to be the best argument for a new car.
Tesla gets away with it (sort of) by having zero dealers anywhere. Even so, they can't currently sell cars within Texas, despite having moved their HQ here. Texas is not alone[0]. Most states require automakers to use dealerships!
Tesla operates stores within Texas, but only to show off the cars. If you express interest, they direct you to the website, as they are not allowed to sell to you in person.
Dealers feel pretty comfortable with their legal protections right now. They probably shouldn't, because things could change quickly, but they won't change easily.
0. https://cleantechnica.com/2019/08/03/where-tesla-can-sell-ca...
But let's not pretend manufactures are innocent in all of this. For years, they tacitly encouraged shitty behavior from dealerships. They pushed margins so low that dealerships could only survive by hitting lofty sales targets and selling overpriced addons.
The reason dealerships are okay with buying up new cars and selling them immediately as new is because this was the standard MO necessary for years to hit quarterly targets. If the dealership was two vehicles short of their target, and no customers were coming in, it looks like a few managers were buying some cars to trade back in next week. Customers don't blink at buying a "used" new car because dealerships just call them "demo" cars or something.
To my rough recollection, that is also not allowed by law. The US government once acted to prevent single entities from controlling all pieces of a pipeline, a pattern or doctrine that got lost in the 1970s. Many laws from that era remain.
And yes, for sure, I'm not saying manufacturers are blameless here! If not for the laws preventing them from owning dealerships, I'm sure they would have already done so.
Works doubly well for the dealership as they continue to get new cars for behaving.
Buyers have a choice not to buy a Mach-e.
During the supply chain issues they've been the worst in SoCal. We wanted to buy a Sienna earlier this year and they wanted $15k over sticker and a non-refundable deposit with a 90+ day wait.
This is a dealer problem, and Ford is the only traditional auto manufacturer pushing back.
The Toyota waiting list had like 20 people on it, cost $1500 to get on, we'd have to buy fabric protection and ceramic coating for the dealer when we got the car...and we probably wouldn't even have gotten the car until early next year (this was in June)
They also wouldn't have a new vehicle available for 2 months as their cars were sold that far in advance.
Is that.....meant to be long? Everywhere I ask, every dealer every brand, every model, if you want a brand new vehicle from factory, the wait time is at least 6 months, usually 12+ months. If you want a brand new Kia EV6, the earliest delivery time is Q1 2024 - the order book is closed for 2023 already.
The dealerships I spoke with get small monthly deliveries, and only the unpopular trims are available at the 2 month mark.
I suspect being in an area that makes extensive use of salt on the roads in winter might not help, as new cars will depreciate that much faster- perhaps they simply aren't in as much demand as used cars. Used retail prices right now are nearly the same as MSRP if it has less than 50k miles.
Of course, if you want one of the trendy models, wait time is almost certainly much longer.
b) They don't. Plenty of Toyota dealers are marking things up to the moon.
My wife had a Mazda and their dealership was amazing, so we've had Mazdas ever since. There are some dealerships in town that would probably be bad, but I doubt any are as bad as that particular Chevy dealer.
Our Mazda cars have been great, too, of course, or it wouldn't matter how good the dealer was.
I had a similar experience when Ford chose to discontinue all their sedans. I personally like an intermediate sedan for my daily driver - it's small enough to be fuel efficient and easy to drive, but large enough to hold 5 people and go touring in (not to mention fit me, a larger individual). When Ford stopped selling a sedan, I no longer became a customer interested in their products, even after having two previous Ford vehicles that I've been quite happy to own.
The difference between my experience and the experience above here, however, is that the car manufacturer receives the brunt of the hate, but holds very little responsibility for the actions that hate. Dealerships have been the villain in the car buying story ever since I could remember. They were the casino, and the house always wins. When you've played the villain for so long, I believe it's only natural for you to decide to become the best villain you can be.
The Mustang is a great car if you're looking to have fun, but it's not very practical.
The Lightning is amazing. I've gotten to ride in my neighbor's Lightning a few times, and I would buy it in a heartbeat if it weren't sold out through the end of next year.
My neighbor did not pay a dealer markup on the vehicle (in SoCal). I don't know if that's because the dealer was playing nice, or because Ford threatened to withhold Lightnings from dealers that added markups and they didn't want to lose out on future shipments.
With the former, I control the entire sales UX and receive a higher price. If we're talking physical goods, I do have to spend more effort getting my product out there for people to inspect, try, etc. With the latter, I'm outsourcing sales to someone else. They have to procure the land, build the showroom, etc. I as the product maker just need to dump my products on them. That person receives a cut of the sale.
Assuming I have my understanding above right, I see the following factors challenging the dealership/reseller model:
* The product doesn't need to be physically inspected anymore. Much like the purchasing behavior around an iPhone, if the customer can easily grok what's going on a webpage _and_ easily return it, they are more open taking a leap of faith sight unseen or "less seen". At this point, the reseller model brings friction into the process.
* The product is so in demand that the reseller accumulates leverage and starts to upcharge which OP's video is related. The product maker has no control over these premiums. In a high volume low margin business with added pressure to eke out anything, the product maker begins to wonder.
* Due to high real estate costs, the reseller underserves certain geographies.
Does any other car company let you order a car online for a flat price with minimal overhead and have it delivered right to your door?
Tesla has fought every other car company state by state with little support to be able to give the consumer a significantly better buying experience.
I’m sure if you asked the CEO of Ford today he still wouldn’t support Tesla’s business model. You can’t play both sides.
Also Tesla prices are only up 15%. That is inline with inflation. Dealer and scalper markup on game consoles is way beyond that.
What's going to really kill dealerships is that EV's need so much less maintenance than ICE car's and most of that maintenance is tires and wipers which is highly competitive. Service is where dealerships make the bulk of their money.
https://www.youtube.com/watch?v=meHYBhcpdvQ - The Stealership Trap - Why We Need the Dealership "Rip Off"
This is for motorcycles but the jist of it is that the situation with dealerships is convenient to motorcycle manufacturers. I suspect it's semi applicable to cars as well.
I'd put this into the "current model needs to change" category rather than in defense of it, regardless of what the title of the video may otherwise suggest.
Ford's switchover makes sense if their factories are running 100% flat-out and every car has a waiting customer. Or if it's all made-to-order and the queue is full.
What happens if demand drops off? Is Ford going to stack up cars in Dearborn or will they just randomly shut down plants to take up slack? Will you need to prepay for a car so they have the money to make it?
No, really. If Land Rover Discovery 2dr were in stock at MSRP there's a high chance I'd have been silly enough to buy it.
I got there and oops they forgot to mention that the car had a extra options package that increased the price by $$ also the car, in our opinion, had a manufacture defect which they said was normal. Finally they gave an offer on my trade-in that was about half the bluebook value.
Almost on a whim we we stopped at another dealership on our way home and got the same car, sans defect, at a lower price with a higher trade in. I think the dealerships that participate in these services rely on customer trust. The customer wants to believe they are getting the best price and the customer doesn't want to comparison shop, they just want to buy a car and go home. The participating dealership is taking advantage of that.
We stumbled upon a effective car-buying technique - come in the dealership late afternoon and tell them, truthfully, that you've got to get home before the baby-sitter leaves in about 45 minutes. We were just planning to test drive but they were motivated.
"We want car for X",
"You can have it for Y"
"We don't have time to bargain we've got to get home"
"OK, you have have it for X"
We got the car we wanted, the trade-in value we wanted, we brushed aside all discussions of extra features. Gotta go, take it or leave it.
We made it home in time and she did really have to leave. We're not good actors, I think we could only get away with it because we were 100% sincere
You'd often get $8-10,000 off a vehicle, and even more off if you bought a full-size truck.
In Europe the dealerships, while often operates independently or with only partial ownership from the brand, seem to be mostly showrooms with no large lot of new cars but a small selection of cars only for show/test. The purchase is for a custom built car received through the dealer several months later. In my experience a pleasant way of buying a new car. Usually you visit the dealer having configured a car using the manufacturers online tool which gives you the exact quote. At the dealer you might be recommended to swap some option but usually you just talk it through with the salesperson and place the order. With some luck you might be able to score a bit of a rebate or extras e.g if you use their brand financing or insurance, but for the most part they just help you order the car you configure online for the price you saw online.
Where they do fleece you though is “brand service”.
But if I look at a 1 year old used vehicle, prices seem to normalize and become much more consistent. Using Carvana & CarMax, the price of a Bronco Sport seems to be free and clear of arbitrary markup.
So what is the allure of new? And of buying used from a dealership? They both seem like really bad choices. But maybe there’s some real benefit to new I’m missing? I’m seriously in the market & see a video like this and feel that it reinforces my opinion that I’m better off with a used vehicle for the sake of depreciation I’m avoiding and the nightmare of doing business with price gougers.
In a lot of places there are two scenarios in the local car market. One dealership will sell at MSRP but you’ll have to wait 4 to 6 months. Another has inventory but at a significant markup. You can buy now and pay more or wait a while and pay less. Choose the option that fits your situation. Of course, the best option would be to properly fund public transportation.
https://www.motorauthority.com/news/1136687_gm-threatens-dea...
They want what Tesla is already doing.
There are definitely scalpers for other brands. People are special ordering Mavericks from Ford and get them after 6 months or so and then reselling.
https://electrek.co/2022/06/15/tesla-tsla-increases-electric...
https://www.motorauthority.com/news/1136687_gm-threatens-dea...
https://www.carsdirect.com/automotive-news/industry-news/for...
Just like Microsoft and Sony should of done with game consoles, but never did - Tesla has centralized buying which allows it to easily prevent scalping.
Increasing prices has much to do with whether or not there is a reseller market. You are very much wrong.
I haven't seen Sony, Microsoft, Ford, Tesla, gas stations, etc.. raise their MSRP to deal with scalpers, only inflation.
I have real examples that prove you're point wrong.. do you have examples that help prove you're even slightly right?
There is a large reseller market for PlayStation 5 because the price Sony sells at is much less than what the market is willing to pay. So scalpers step in seeking the potential profit. There are a number of reasons Sony doesn’t raise MSRP. The main one being goodwill and future buyers. If they raise their prices to $1,0000 the psychological effect will be long term detrimental. So they don’t raise prices. But there is a market for scalpers because of this.
I’ve posted links demonstrating there is a scalper market for some new cars. Indeed, dealerships are often times, in effect, becoming scalpers by raising prices. If all dealerships sold at MSRP this would not benefit consumers in the least. Scalpers would just take over and buying a car from a scalper is a lot worse than buying it, at a premium, from a dealer.
Call it price gouging, scalping, theft or what have you. The words used don’t matter. All that matters is that there is enough potential profit to be had at the imbalance between MSRP and what buyers are willing to pay for cars that someone will be attempting to take that profit. It’s either going to be the manufacturer (Tesla), the dealer, or a third party.
Oh wait you can’t. What’s your argument, raising prices was a preemptive strike against scalping? That makes sense. Really your point was disproven like 5 posts ago. Inflation across the supply chain is obviously the reason for price increases.
Sorry it’s not all a conspiracy with Tesla lying about their motives. Maybe that’s easier to believe than accepting that you could be wrong.
They just dont want to burn their bridges with traditional retailers quite yet Im guessing.
Dealerships are absolutely doing this themselves - create a shell company, sell to their own shell company for MSRP, sell back to the dealership at MSRP, now you get to report a compliant sale to the manufacturer, and you have a "used" vehicle on your lot with <100mi that no-one can tell you not to sell for $20K above MSRP.
https://www.themanual.com/auto/markup-exposes-car-dealership...
Currently have a 2022 Outback on order and final price including drive-away costs in Australia came in at ~3000$ AUD below the online build price.
That was including some accessories and delivery costs to a different state from the dealership where I ordered it...
And if you try to work with the other companies to move prices up together, that's illegal. Same for airline tickets.
Ford's CEO trying to address this dealership franchise problem is going to bode well for the Ford brand overall. They are best to keep their prices down for now and make the dealers look like the bad guys everyone knows they are.
It still runs, incidentally. :)
Is he insinuating that dealers are all illegally conspiring by the way? There must be at least a dozen Ford dealers in a 100 kilometre radius of your house they aren't rare. Find the cheapest one.
https://www.kbb.com/car-news/the-future-of-car-shopping-fewe...