#CarDealership

Though car dealerships often get the short straw when it comes to customer trust, most are legitimate businesses that aren’t out to rip off unsuspecting customers. An Oklahoma teen recently flipped the script on that narrative and is accused of defrauding an Oklahoma City dealer out of almost $100,000.

Federal Trade Commission (FTC) has proposed comprehensive rules changes regarding dealership advertising and how finance and insurance offices are handled. However, dealers, specifically the National Automobile Dealers Association (NADA), aren’t happy with these new ideas and have issued formal challenges to the regulatory scheme.

If you frequent this website, there’s a good chance you’ve seen an article discussing how smaller car dealerships are being incorporated into larger entities over the last few years. As with most other industries, the trend has been accelerating and Automotive News just shared the metrics showing how far we’ve come over the last decade. According to the report, consolidation among mega dealers has made heaps of progress of late and should continue on with their mission of never-ending growth because none of them want to become the little guy after every pint-sized showroom has been bought up in North America.

As the industry continues struggling with its planned swap to electric vehicles, we’ve seen plenty of framing suggesting dealer networks are only too happy to participate. But it’s usually juxtaposed with articles indicating that pushback exists, typically whenever the metaphorical rubber meets the road. This month provided several premium examples stemming from the National Automobile Dealers Association Expo (NADA Show 2022) held at the Las Vegas Convention Center.

Though the best had to be when several dealer groups piped up about how much it’s actually going to cost them to install some of the newer chargers some manufacturers believe should be mandatory if they’re intent on selling EVs. Some showrooms are finding out that not all buildings are wired for the high loads incurred by modern charging systems, requiring additional financial investments they hadn’t counted on. With automotive dealerships using product delays as leverage for unprecedented vehicle pricing, it’s nice to see them getting a taste of their own medicine. Or it would be if the costs for updating facilities weren’t guaranteed to be reflected on future window stickers.

With various government and corporate entities pushing rolling restrictions to our everyday lives, the automotive sector has gotten extremely creative in how it does businesses over the last nineteen months. Everything is being digitized so business can be conducted remotely, including sales. But this creates an issue for shoppers who — and this is going to sound crazy — actually want to see and familiarize themselves with one of the largest purchasing decisions they’re likely to make this year before committing.

Luxury brands were already testing at-home test drives and subscription-based vehicle exchange programs by the start of 2020. But we’re now seeing more pedestrian brands trying similar strategies to reach customers from beyond the confines of the dealership. Kia even recently announced a pilot program to sync digital sales with at-home test drives. Called “Kia@Home,” the service allows shoppers to schedule a vehicle to be sent to their home for an hour-long assessment.

Years from now, there’s a distinct chance that humanity will look at blank check firms, better known as special-purpose acquisition companies (SPACs), with disdain. Today is not that day, however. Cazoo Ltd, which has often been called the British Carvana, is reportedly selling itself to Ajax Holdings for a breezy $7 billion USD.

While the used-vehicle retailer initially planned on an initial public offering in London, merging with Ajax Holdings means it’s to be listed on the NYSE and probably at an astronomical price if the history of SPACs are anything to go by. This one happens to be owned by American billionaire and career hedge fund manager Dan Och, who said he would like to join the company’s board once the deal has gone through.

Car dealerships around the nation are reportedly having trouble restocking inventories following the prolonged production shutdowns enacted in response to the pandemic. Despite supply chain issues subsiding a bit, Cox Automotive reported the industry only has a 62-day supply of vehicles. That’s approximately 2.3 million sparkly new units, and would be more than enough to keep consumers happy if people didn’t care which model they drove home. Demand may still be suppressed, but the selective nature of shoppers is not.

For example, you may be able to find a Nissan Rogue (the brand’s biggest seller) without much hassle. But finding one equipped how you wanted may be outside the realm of possibility in 2020, depending upon where you live and the fickle winds of fate. And you could apply that same logic to any number of brands, as most continue to note that some suppliers and assembly lines occasionally have to shut down to comply with health mandates.

With large hunks of the nation still under varying degrees of pandemic-related restrictions and accompanying panic, auto dealerships haven’t been awash with customers. Many that did reopen have been forced to follow distancing guidelines, frequently limiting the number of people allowed on the premises. Hoping to avoid closing permanently and relinquishing ownership to the bank, they’ve come up with some interesting solutions to keep their clientele interested.

Virtual test drives aren’t exactly new, but they have become an increasingly popular avenue for dealerships hoping to drum up business in 2020. While we’ve seen salespeople giving tours of new product as they hit the lot for years, on-board video is typically reserved for independent review purposes. That’s largely because nobody really expects a fair assessment from the person selling the vehicle. However, with in-person test drives becoming quite difficult, showrooms want to exercise every option they have to draw in customers.

Caroline Writes:

Good day Sajeev:

I was blessed to find your information on line. I am experiencing the exact issues mentioned on your site regarding my 2013 Volvo S60. Do you have any advice regarding the best way to handle this matter? Here are the details:

November 2015, I purchased a used 2013 Volvo S60 with 33,000 miles from a Volvo dealer. The car worked fine, within the last year (2018) the synthetic oil started burning out within 60-90 days. Synthetic oil changes are supposed to last for 7k miles. (my oil changes didn’t last for 1,000 mi). I have taken my car for servicing at the Volvo dealer. I searched the web and found my issue is a common issue with Volvo: Piston, Oil leaking, engine problems. There has not been a recall.

Dealer states they will cover parts, but I must pay $2900 for service hours. Why should I suffer penalty of $2900 for an international issue with the make and model of Volvo?

TTAC Commentator Halftruth writes:

Can we talk about the absolute incompetence at dealerships?

• Mild issue: Bought new SUV for wife back in 2010. Wife complains that “something not quite right.” I drive it and notice something slightly off. Take it to dealer, no trouble found. On a whim, I check the tire pressures: 40 psi, 37 psi, 45 psi and 35 psi. I called the dealer on this as they missed it TWICE. Once during prep and once when brought in for the original complaint. I asked how could they miss this and was told “well, it is a new machine and some of the guys are having trouble with it.” To which I replied, “I don’t have a machine and I was still able to troubleshoot this and DO YOUR JOB!” Service manager was not happy with me.
• More severe issue: I went for a late-model used sedan and picked a local dealership that I had bought cars from 3 times before. I test drive a car, like it, come back with the wife and decide this is it. I backed the car in and by mistake popped the trunk; the young salesman was all too eager to show my wife the trunk and how clean it was. I saw a pushpin sitting in the spare tire area. I asked the salesman, “you know what this is, right?” He said no. I explained this is one of the pushpins that attaches the bumper underneath. He turned white and I got right under the car and, sure enough, the bumper was not attached well and was flopping around. At that point I asked for sales manager and asked about their 172 point inspection and if there were any accidents on record. They had no answers. We ended up agreeing to them fixing the bumper and replacing the battery, as it had shown some signs of weakness after sitting a couple of days on the lot. I was trading in a truck and the trade deal was very favorable, so I went with it. I come to pick it up and bumper is not fixed, battery not replaced, and the tire pressures were all low. I left and bought elsewhere.

Kindly shine some light on this.

While sales numbers are a decent metric for assessing volume, they don’t give an accurate representation of what’s actually happening at the dealership. Instead, the figure represents the number of models an automaker was able to move from the factory. Theoretically, a manufacturer could load up a bunch of trucks at the end of the month and count them as “sold” to bolster volume — whether or not real people actually bought them.

Dealer throughput is better for assessing the current consumer climate. But we’re sure you won’t be surprised to hear that it’s cold and only expected to get colder. U.S. dealership throughput, the average number of new-vehicle sales per dealership, is expected to slip 2.9 percent this year. That equates to a mean of 920 vehicles in 2018, down from 947 in 2017.

Over 25 percent of the used vehicles sold through eight CarMax locations in the United States had recall defects that were not addressed, according to a recent safety report.

The 2017 study, conducted by the Center For Auto Safety, the Consumers for Auto Reliability and Safety Foundation and the MASSPIRG Education Fund, noted that vehicles with unresolved safety recalls had more than doubled since 2015 at the five locations surveyed in both years. That is worthy of a raised eyebrow or two.

Questions remain, however. While the review cites numerous locations selling vehicles with what many would consider unacceptable issues, we don’t definitively know if this is indicative of CarMax as a whole. But lets face it, there were 64 million vehicles recalled for safety problems last year — exceeding the total for the previous three years combined.

Car dealerships are an American institution. Often controlled by a patriarch with an unusual amount of sway in the local community (and their sometimes cosseted children), dealer franchises dot the country’s landscape like moles on a back. Isolated near exit ramps, they serve as gleaming beacons of civilization as you traverse through long expanses of wilderness on a road trip.

North America wouldn’t be the same without them but, according to one automotive regent, irreparable change is coming to the dealer networks we’ve become begrudgingly accustomed to. Bill McDaniels, president of McDaniels Automotive Group, runs a half-dozen stores selling selling Acura, Audi, Porsche, Subaru, and Volkswagen-branded vehicles in South Carolina. He’s one of those automotive viceroys mentioned earlier, right down to having his son as the chief operating officer for his business, and he’s convinced the era of family-owned dealerships is almost over.

Is this one man’s paranoid delusion or an astute observation of industrywide trends?

Ed Writes:

Sajeev,

I bought a 2012 Volvo S60 originally, but there was an ongoing issue the dealer could not fix. Amazingly, it offered to replace the car with a 2013 model after about 10 months of trying to fix the issue (at no cost to me). So, kudos to the dealership — I obviously feel like they did me a solid.

Fast forward to today and my 2013 S60 now has 60,000 on the odometer. During the last oil change cycle, I got a “low oil” warning pop up for the first time around 55,000 miles. I pulled over and the car was almost bone dry. I put in a couple of quarts and called the dealership. Since it was close to the oil change time, they asked that I just bring it in for a quick look and oil change. I did so, and now, just 3,500 miles after that dealership visit, I noticed my oil level has gone from the top of the “normal” range on the dipstick to the bottom. At this rate, my oil level will return to bone dry again in the next 1,000-2,000 miles.

On the Volvo forums there are a number 2012 models with oil burning issues and it looks like the dealers are all over the place when dealing with this issue, especially with cars that are out of warranty (in terms of goodwill assistance). So, do I press my luck and see what the dealership will do to help here or just trade it in for another car and keep quiet about the issue, considering their past goodwill towards me?

From what I read, it seems like the first step is a ring replacement ($3k) and if that doesn’t work, an engine replacement ($$$). Any thoughts?