NJ Assembly, NY Governor Pass Direct Auto Sales Legislation

I'm not sure what you mean? I bought my car and e-mailed the guy - "How about invoice minus the $1000 in factory cash back." "Ok." he said. I helped a friend buy a Subaru and I said, "Invoice?" He said, "OK." I'd assume we move toward just putting the invoice price on the sticker and get rid of the fiction that you're getting a deal. Then again, the Apple Store guy was hired to be the CEO of JC Penny and got fired. His theory was the American public wasn't so stupid that they could double the prices and put everything on sale 50% off and they'd think they were getting a deal. Turns out the public is exactly that stupid.

I said from the get go that Tesla could have won a federal court case from the Dealers block in keeping them from selling direct. Henry Ford took the Dealers Association to court in a fight to sell his model T and as history has it he won. I would prefer to buy directly from the mfg. since it would lower the msrp (no haggling required) and you could be in and out of a mfg showroom in less than an hour. This would be a dream come true.

"will people still demand discounts from the manufacturer run stores, or will they be willing to take the sticker price and be happy with it in compensation for a greater retail and service environment?" If you add to this a better-built product, then yes, they would. I think you'd also see the MSRP drop somewhat as they no longer would have a middleman in the picture. You wouldn't get the discounts, but you also could have a lower up-front price by anywhere from 10%-40%, depending on type of vehicle.

@jmo The question there arises as to whether you're getting the REAL invoice, or an inflated one created for just that purpose. Back when I was in auto sales, I saw as much as 80% markup on certain vehicles between the real invoice and the 'display' invoice with another 20% or more on the actual sticker price. Not stating any brands, but it had to do with SUVs that had a balcony.

I don't KNOW if independent dealers are better, worse, or the same than manufacturer direct sales. And short of a large state repealing its indy dealer mandate laws and allowing a market test, KNOWING what is the best dealer/sales model is not know-able. If such a mythical state, let's call it Hayekansas, were open to all forms of OEM selling and dealers, there may well be a mix of local and OEM selling. What works in a city/suburb of 500K may not work in a large county with 3K residents. Again, there's no WAY to know what is the best model. That said, given the Soprano grade protection racket that many states' give their car dealers, it's hardly surprising that consumers' car buying experience is often frustratingly degenerate.

Vulpine - Well, that's a big assumption there. Were I the manufacturer there's no way in hell I would lower my MSRP if I went to a manufacturer owned distribution model. I'd keep the price the same as it is today and pocket the difference. Regardless of the middleman, the only reason to go to a manufacturer led model is to gain better control of your brand and the customer experience. If anything the costs for the manufacturer increase because you've now taken on a massive increase in headcount, real estate, taxes, etc. Apple's stated reason for going into direct competition with their retail channel was because they thought they could do it better than third parties and they wanted to better control the customer experience. Prices, if anything, have increased, not declined. I suspect we would see the same thing with automakers.

"I suspect, without much evidence mind you, that retail prices on automobiles are lower thanks largely to competition between dealerships." You would expect them to be, as dealers have to compete against each other. This is Econ 101, and those who don't understand this are simply clueless about basic economic concepts. That being said, what complicates this is the nature of the dealer model, which seeks to identify the weakest customers and exploit them. Economic theory would tell us that a direct sales model will result in higher prices, but there may very well be individual customers (those who are easy marks) who do end up paying more to a dealership generally because the dealer is more likely to go for the jugular. One would expect the OEM to care more about its brand and to act accordingly, although you never know...

@Auto Motive Henry Ford never sued a "Dealers Association". It was Ford who was sued in 1903 by the Association of Licensed Automotive Manufacturers, ALAM, the cartel of automakers that had licensed George Selden's general patent on the automobile. When he started Ford Motor Company, Henry Ford had applied for a license but ALAM turned him down because they didn't like his plan to ultimately build a low priced car for the masses. Ford ignored them and went ahead with making the Models A and C. In 1906, Ford introduced the Model N, his first really big success, selling over 7,000 units. The Model N and it's derivative Model S made the Model T possible. Ford litigated with the Selden cartel until 1911, when the patent was overturned. Of course, by then it was moot as the Model T was a huge success. Ford sold almost 70,000 Model Ts in 1911, a figure that would more than double the following year. It's possible that franchise laws were written in response to Ford's behavior. After his stockholders sued him in 1916 for not paying out dividends as Henry hoarded cash to build the Rouge Complex, I've seen it reported that Ford would essentially force dealers to take whatever he shipped them so he could use that revenue to buy out his stockholders.

@hreardon An illogical argument when you consider that almost no vehicle is actually sold at MSRP--unless it's a very high demand vehicle. Pickup trucks, probably the most popular single type of vehicle, sell for thousands off of MSRP on average and with factory incentives can add up to over $10,000 off of the so-called retail price. Now, imagine if the middleman weren't in the picture and that MSRP was really $5,000 lower in the case of trucks with the added factory "rebates" to boost sales? You are right, prices have gone up and they're going to continue going up--but the stereotypical new car dealership doesn't help matters by demanding their pound of flesh from both manufacturer AND the consumer. Why are those franchise dealership laws in place now? To keep the manufacturer from undercutting them and driving them out of business. Nearly everything wrong with the automotive industry today has a cause that originated in the dealership. Option packages instead of A la Carte? Easier to place an order with only three or four packages instead of dozens of separate options. Limited number of color options? Because dealerships only ordered limited colors, knowing others are "less popular". We call certain colors "most popular" today simply because we have no choice in the matter. Look back into the '60s and '70s to realize we once had a veritable rainbow of color options; now we're stuck with red, black, white and two or three shades of grey/silver. Blue is finally starting to show up again, but green? The oh-so-hated brown? I personally like both of those colors, though the majority of the cars I've purchased have been a nice burgundy (very dark red). I'd like a nice, metallic chocolate brown. I'd like a nice forest green. How about teal, or a sky blue, or russet? How about some variety to let people express themselves without having to pay a third party to re-paint their brand-new car? No, the dealerships are NOT protecting the consumer, they're protecting themselves and using the consumer as an excuse. Oh, and maybe you should try an Apple computer sometime. On the average they're more reliable and their customer service--even or especially for repairs--is exemplary. Their prices have NOT gone up any more than PC prices and you get a lot more for your dollar through the intangibles that go far beyond the product itself. Third party repair shops frequently abused Apple's customers--especially on warranty support. Apple-authorized shops where I live used to demand a non-refundable deposit just to diagnose a warranty repair--against Apple's own written policy and legal statements in the contracts. Apple was RIGHT in opening its own shops in metropolitan areas, because their customers were being abused by unscrupulous operators. Yes, I agree it also hurt their truly legitimate independent dealers, but even their reputation was getting hurt by the bad ones.

Vulpine, I must not have explained myself well enough: If manufacturers open their own stores, inevitably they are going to start revoking franchises and begin to control the market themselves. More to the point, should the automakers duplicate the Apple experience, consumers will walk away from the traditional franchises on their own. Once they do that, competition (for that brand) begins to disappear. At that point, when you've got three brand showrooms all owned by the factory you're going to pay what the factory wants. Of course market forces will come to play here brand vs. brand, but I guarantee that transaction prices will increase. I agree that dealerships add little to nothing to the customer experience and I'd gladly see the model disappear, but I do not think transaction prices for most brands will decline, especially premium brands. That said, the factory owned model will probably work best in the premium space where customers place a higher value on the dealership experience and are more price elastic. Don't disagree on any point you made about Apple retail, especially considering as I played a (very minor) roll in the early planning stages for Apple retail in December 2000/January 2001.

Pch101 - Exactly. The primary reason for automakers to go to the factory-owned route is to better control the brand experience. I don't find most dealerships to be that much of a burden, and that may be because I know what I want and what I'm willing to pay, so my trips to the dealership is usually a very quick affair. In fact, rarely do I step foot into a dealership without having negotiated the deal via email prior. Remember, another reason factories like the dealership model is that it allows them to offload inventory on someone else's books. IIRC, as soon as the car is tagged with a sticker listing the purchasing dealership, that car gets invoiced. Now it's the dealership's inventory headache, not the manufacturer.

@hreardon Pch101 - You're CERTAIN (its Econ 101! - anyone who doesn't drink your kool-aid is "clueless") that consumers benefit from state prohibition against direct from manufacturer selling? Really? One benefit in favor of direct OEM selling could be a nationwide price-point marketing: "Camry LE are $20K for the month of May!" But good luck with that with the G waiting in the wings to go Pauli Walnuts on any such manufacturer. Economics is not settled quantum mechanics where the math always agrees with experiments to 5 decimal places. Unlike you, I don't KNOW the best car retail model. It is not know-ABLE. But to assume that state-legislative pipe heads DO KNOW??? That is the height of arrogance.

@ihatetrees "You’re CERTAIN (its Econ 101! – anyone who doesn’t drink your kool-aid is “clueless”) that consumers benefit from state prohibition against direct from manufacturer selling?" If you want to exclude yourself from the clueless category, then you should begin by understanding what I said. I didn't comment on regulations that bar OEMs from selling cars. What I said was is that competition among dealers should reduce prices. What that suggests is that a retail monopoly would lead to higher prices.

The dealership network is NOT scared witless. It isn't state franchise laws standing between OEMs and direct sales. It is the OEM franchise agreements with its dealers,unassailable under contract law, as well as common sense. What OEM in its right mind wants to sell direct? Hasn't that been tried enough? But Hey! If they want to have another go at it, I'd love to watch it unfold as I watched the Ford Collection unfold and then unwind.

Cannot be serviced easily? Have you seen the parts that make up a Tesla? Cars are stupidly simple when you remove the complications that a combustion engine brings.

First I would have to question what type of breakdown you're talking about. Secondly, Tesla would not only have the car picked up, but they would deliver you a loaner--apparently this is usually an 85kWh model--to use while yours is being repaired, then bring your own vehicle back to you and pick up the loaner. And if it's under warranty, they do it all on their own dime. The nearest shop? Just a little over 100 miles away--100 miles you DON'T have to drive. By no means is this a "scam". So you must be, "missing the so-called business plan along with the consumer plan".

@Vulpine Any break down that prevents you from moving. So cool to think another will be delivered and you get a loaner...but in reality you are traveling. You got stuff and in a hurry. You need to move along. Failed brakes. Failed stearing. Failed motor(s). Broken anything that prevents further travel...that is what I am talking about. Getting your car repaired and back on the trail is what I am talking about. Every other promise listed here is just that...words. Its snake oil salesman/peddler talk. In my opinion, this on a large scare is just nuts and only elite can use it. Real world families and trave,ers cannot. To think otherwise is delusionary.