Buick dealers giving up franchises

[Torrid]

^^A question: When someone buys a car online they're still buying it from a dealer because car companies won't sell to individuals and it's where warranty (and other?) service is done, no?

No, you're still buying from the company in the case of Tesla at least. Tesla doesn't have dealers they have service centers. What it means for people like me who live in a state that aren't able to sell direct to consumer is that I had to drive to the closest state to actually pick the car up, which for me was Illinois. I still have service centers in my area, I just can't pick up a car from them.

Unless the whole industry changed I don't think it would make this law go away. No tax is paid at the point of sale so the tax is paid when the car is registered. The state I live in still gets their money.

 

[proveitwithdata]

The dealership distribution model is approaching end-of-life. All cost and little (or no) value added. The Internet continues to accelerate change. Couple that with the dealership's well earned reputation... They dug their grave and tech is pushing them in.

Everything changes. As the current generation passes the torch to the next, dealerships will be dinosaurs.

"you can pass as a hero or stay long enough to become the villain" and all roads leave customers screwed in all forms.

I see this happen in all industries and dislike the way its going. Cable companies were disliked by folks, streaming stepped in and folks were in awe of how nice and better they were as a services provider. Nowdays their prices are higher and well good luck leaving to a cheaper option. Competition is a must in any industry.

In the end, we might all have the tesla model where overnight folks went upside on car loans but at least the dopamime rush of ordering your next car in pjs exists.

 

[dguzzi]

There is a Tesla dealer in Ann Arbor. New and used....just like a dealership...

 

[4WD]

This already happened last year with Cadillac .....and my local small town rural Chevrolet/GMC/Cadillac/Buick dealer refused to invest so they gave up their Cadillac franchise last year. I am pretty sure they are going to drop Buick as well. The folks I know there figure it's just a matter of time before Chevrolet does the same.

Same in my small town - now the Escalade crowd buys Denali

 

[Torrid]

Same in my small town - now the Escalade crowd buys Denali

Does anyone know what buy in cost GM is requiring to do this? If they're legitimately asking for money or requiring money to be spent for infrastructure and I was a small town dealer that couldn't shoulder that, I'd be out too and I support EVs.

I know my Ford dealer has embraced it, but I don't know what Ford required. The only noticeable change I've seen is a single level 2 charger on the side of the building and plenty of EV inventory, new and used.

 

[proveitwithdata]

Does anyone know what buy in cost GM is requiring to do this? If they're legitimately asking for money or requiring money to be spent for infrastructure and I was a small town dealer that couldn't shoulder that, I'd be out too and I support EVs.

I know my Ford dealer has embraced it, but I don't know what Ford required. The only noticeable change I've seen is a single level 2 charger on the side of the building and plenty of EV inventory, new and used.

https://electrek.co/2022/12/21/buick-dealers-to-spend-at-least-300k-to-sell-electric-vehicles/

300k mini invest for a brand that own less then 1% of marketshare in ice is ballsy.

 

[PandaBear]

Honestly, I really don't understand why there are so many cars of almost identical designs under different brands under the same roof in many domestic dealerships.

It is like, buying milk in a supermarket just having multiple brands to pretend you have choices. GM is probably slightly better than the 90s and early 2000s Ford. Taurus and Sable are "identical". Why in the world would people do stupid things like that is beyond me. I am obviously not surprised they cancelled Mercury. I was surprised why they didn't cancel Buick but I think China is the only reason.

I think in 2023 we still have too many brands, for no reason. They are probably better off consolidated and focus on better products instead.

 

[JeffKeryk]

"you can pass as a hero or stay long enough to become the villain" and all roads leave customers screwed in all forms.

I see this happen in all industries and dislike the way its going. Cable companies were disliked by folks, streaming stepped in and folks were in awe of how nice and better they were as a services provider. Nowdays their prices are higher and well good luck leaving to a cheaper option. Competition is a must in any industry.

In the end, we might all have the tesla model where overnight folks went upside on car loans but at least the dopamime rush of ordering your next car in pjs exists.

Internet sales are destroying brick and mortar; there is no going back. The dealership distribution model adds little or no value. But it sure adds cost.

 

[proveitwithdata]

Internet sales are destroying brick and mortar; there is no going back. The dealership distribution model adds little or no value. But it sure adds cost.

Direct sales model does allow higher margins on sales, since they are not wholesaling the car to dealerships.
But Tesla, who is the direct sales model king, still has had to build/lease/staff showrooms and Tesla has to pay, not the dealers.

The franchised dealership owner has to pay to finance his inventory (carrying costs/interest expense), pay for the lease or mortgage on the property/buildings, make the lease-hold improvements to the properties and pay the employees. None of that is free. The manufacturer avoids incurring those costs/overhead in the case of traditional dealerships.

According to NADA, these are costs of retailing cars and the cost will be incurred by whoever is doing the retailing, whether it’s the manufacturer or a dealership.

By outsourcing the sales part of the process to a dealer, and the local dealers compete with one another, there are incentives to minimize those costs. And in a normal market, heavy discounting contributes to higher depreciation rates and degrades the brand sometimes.

The real monetary benefit to the automaker of direct sales happens, and it's not from cost savings incurred its revenue side, control of selling price which is predictable = MSRP.

 

[John105]

Internet sales are destroying brick and mortar; there is no going back. The dealership distribution model adds little or no value. But it sure adds cost.

In my mind, this creates a nightmare for the person who services their vehicles at a dealership.

Remember when BMW offered free service for 4 years to include brake pads and rotors? Oil changes even if you only drove 600 miles in a year (there was a lot of it so they changed the policy on this and on brakes)? It was refreshing to say the least as someone who bought the car.

"Jeeves, can you please replace the wiper blades and the seat belt butlers, they've broken again."

"But of course, and we're also replacing your brake fluid and coolant at a cost of $0."

Upsell was non-existent. Things were replaced per the book--no need to check with the owner.

Contrast that to another upscale car such as Lexus. Drive in, and $6,700 of bogus recommended services, that are 100% not needed. Not only that, an imaginary service needed every 5,000 (at least 5 or 6 years ago).

What's better? How is service then under a direct model, is the extra margin passed on to the consumer where they get good service lol

 

[jhs914]

124k cars sold by 2k dealers is 62 per dealer over 9 months is 7 per month not 2. Still nothing worth noting but at least 7 beats 2.

Reread his quote. He said 2 per week.

 

[JeffKeryk]

Direct sales model does allow higher margins on sales, since they are not wholesaling the car to dealerships.
But Tesla, who is the direct sales model king, still has had to build/lease/staff showrooms and Tesla has to pay, not the dealers.

The franchised dealership owner has to pay to finance his inventory (carrying costs/interest expense), pay for the lease or mortgage on the property/buildings, make the lease-hold improvements to the properties and pay the employees. None of that is free. The manufacturer avoids incurring those costs/overhead in the case of traditional dealerships.

According to NADA, these are costs of retailing cars and the cost will be incurred by whoever is doing the retailing, whether it’s the manufacturer or a dealership.

By outsourcing the sales part of the process to a dealer, and the local dealers compete with one another, there are incentives to minimize those costs. And in a normal market, heavy discounting contributes to higher depreciation rates and degrades the brand sometimes.

The real monetary benefit to the automaker of direct sales happens, and it's not from cost savings incurred its revenue side, control of selling price which is predictable = MSRP.

As the customer, I am interested in the price I pay. Why should I pay for that big beautiful building, all the staff and management? Nowadays customers are shopping on the Internet anyways and then heading to the dealership.

Direct sales (like Tesla) carries no new inventory and cars are delivered in batch; those cars are already sold. Staff is minimal as is building foot print.

The dealership model increases costs; it adds little or no value. As the customer, you and I ultimately bear those costs in our purchase price. Just about everything you can buy will be cheaper on the Internet than brick-and-mortar.

 

[JeffKeryk]

In my mind, this creates a nightmare for the person who services their vehicles at a dealership.

Remember when BMW offered free service for 4 years to include brake pads and rotors? Oil changes even if you only drove 600 miles in a year (there was a lot of it so they changed the policy on this and on brakes)? It was refreshing to say the least as someone who bought the car.

"Jeeves, can you please replace the wiper blades and the seat belt butlers, they've broken again."

"But of course, and we're also replacing your brake fluid and coolant at a cost of $0."

Upsell was non-existent. Things were replaced per the book--no need to check with the owner.

Contrast that to another upscale car such as Lexus. Drive in, and $6,700 of bogus recommended services, that are 100% not needed. Not only that, an imaginary service needed every 5,000 (at least 5 or 6 years ago).

What's better? How is service then under a direct model, is the extra margin passed on to the consumer where they get good service lol

Dealership sales is a separate business from service. Service will not go away.

 

[LDB]

Reread his quote. He said 2 per week.

Better than the 7 per month then. I guess they're at least a little glad of that.

 

[SC Maintenance]

As someone who made college money working in a dealer at a young age, it pains me to say they need to just go away. The buying experience sucks, the service experience sucks, and the parts department wants above MSRP for selling me a widget off the shelf. I'll pass.

The idea that dealers provide more competition and hence a better price is nonsense that was dismissed during the period of "market adjustment" pricing. Besides, there are I think 18 OEM's selling cars in the US now - so there is lots of competition. It might be better direct competition when all the real out the door costs can be compared online so I don't have to be bamboozled by the F&I guy.

 

[Burt]

Honestly, I really don't understand why there are so many cars of almost identical designs under different brands under the same roof in many domestic dealerships.

It is like, buying milk in a supermarket just having multiple brands to pretend you have choices. GM is probably slightly better than the 90s and early 2000s Ford. Taurus and Sable are "identical". Why in the world would people do stupid things like that is beyond me. I am obviously not surprised they cancelled Mercury. I was surprised why they didn't cancel Buick but I think China is the only reason.

I think in 2023 we still have too many brands, for no reason. They are probably better off consolidated and focus on better products instead.

Think of cars as refrigerators rather than milk because today they are appliances. Refrigerator manufacturers make multiple brands and sell side by side. There are too many brands but each country thinks it needs to have a locally HQ’d auto manufacturer.

Personally I’d like to see Tesla have multiple brands as it looks like they’re going to dominate the market and it’s going to be boring seeing everyone with the same appliance in the driveway.

 

[proveitwithdata]

As the customer, I am interested in the price I pay. Why should I pay for that big beautiful building, all the staff and management? Nowadays customers are shopping on the Internet anyways and then heading to the dealership.

Direct sales (like Tesla) carries no new inventory and cars are delivered in batch; those cars are already sold. Staff is minimal as is building foot print.

The dealership model increases costs; it adds little or no value. As the customer, you and I ultimately bear those costs in our purchase price. Just about everything you can buy will be cheaper on the Internet than brick-and-mortar.

So did you pick up your model 3 off the factory floor or a delivery center?

Tesla still have delivery centers, sales associates etc. Some are located in high rent locales. Tesla is still bearing the inherent costs of what the traditional sales model negatives and as you said is passing that cost over to you.

As someone who made college money working in a dealer at a young age, it pains me to say they need to just go away. The buying experience sucks, the service experience sucks, and the parts department wants above MSRP for selling me a widget off the shelf. I'll pass.

The idea that dealers provide more competition and hence a better price is nonsense that was dismissed during the period of "market adjustment" pricing. Besides, there are I think 18 OEM's selling cars in the US now - so there is lots of competition. It might be better direct competition when all the real out the door costs can be compared online so I don't have to be bamboozled by the F&I guy.

I understand this pain point and this in response to @JeffKeryk as well, did Tesla not increase their price as well during the same time? I think folks need to snap out of this MSRP being a real number.

During the shortages dealers added adms and called it their market adjusted selling price and the consumer paid more.
Likewise Tesla used buzz words to bump up their msrp and the consumer paid more.

Now that shortages no longer exist for the market, dealers removed the adms and are back to msrp or below, and Tesla adjusted msrps lowering them by 20% in some cases, and now even more for instock inventory for eoq?

 

[JeffKeryk]

So did you pick up your model 3 off the factory floor or a delivery center?

Tesla still have delivery centers, sales associates etc. Some are located in high rent locales. Tesla is still bearing the inherent costs of what the traditional sales model negatives and as you said is passing that cost over to you.

The car was delivered to our home. The next one will likely be picked up at our local store.
The Tesla store model is far cheaper than a traditional dealership.

 

[SC Maintenance]

So did you pick up your model 3 off the factory floor or a delivery center?

Tesla still have delivery centers, sales associates etc. Some are located in high rent locales. Tesla is still bearing the inherent costs of what the traditional sales model negatives and as you said is passing that cost over to you.

I understand this pain point and this in response to @JeffKeryk as well, did Tesla not increase their price as well during the same time? I think folks need to snap out of this MSRP being a real number.

During the shortages dealers added adms and called it their market adjusted selling price and the consumer paid more.
Likewise Tesla used buzz words to bump up their msrp and the consumer paid more.

Now that shortages no longer exist for the market, dealers removed the adms and are back to msrp or below, and Tesla adjusted msrps lowering them by 20% in some cases, and now even more for instock inventory for eoq?

I have no clue, never priced a Tesla. I do know that during the pandemic some Toyota dealers in some areas had huge "market adjustments" on regular Toyota's, and some did not. When the new Frontiers came out in 2021 some Nissan dealers had huge market adjustments in some areas, and some did not. None were selling below MSRP - even though the OEM's never lowered their hold backs. And the dealer added options skyrocketed. If your argument is that its an imbalance in supply and demand in local markets - well then even more reason to have it managed nationally.

Even without the market adjustments I have to deal with Southeast Toyota, which is a whole additional level of pain. Neither Toyota or Nissan have raised their MSRP beyond a few percentage points that you would expect in a inflationary environment.

I work in the equipment side of the industrial world. When I started almost 30 years ago just about everything, even large equipment, came through some sort of distributor or rep. Now probably well over half is direct. The need for a middle man's time has sailed. Again, IMHO.

 

[John105]

As someone who made college money working in a dealer at a young age, it pains me to say they need to just go away. The buying experience sucks, the service experience sucks, and the parts department wants above MSRP for selling me a widget off the shelf. I'll pass.

The idea that dealers provide more competition and hence a better price is nonsense that was dismissed during the period of "market adjustment" pricing. Besides, there are I think 18 OEM's selling cars in the US now - so there is lots of competition. It might be better direct competition when all the real out the door costs can be compared online so I don't have to be bamboozled by the F&I guy.

Myself as well. I worked in a Caddy Olds and enjoyed being around the cars. There was a 4-4-2 convertible in the showroom which at the time really wasn't that old, maybe 17. We were allowed to use the lifts and work on our own cars (single post back then).

What are the finance guys gonna do? I mean they made a smooth transition going from CRTs to flat screens, and swiveling them to the customer for them to witness the tremendous loss on the transaction: "Now I don't know why we would even do this deal, as this is what we're losing (huge red rectangle with a minus sign)." imho this was part of the setup as charitable people feel guilty robbing the dealer, and would like to give some monies back on the protection packages and extended warranties...