Car Dealership vs Direct Car Buying

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Buying a car can is always a time consuming process. With all the options available, you'll spend a great deal of your time deciding on your exact car that meets your budget (while dreaming about the other cars that don't meet your budget). And it's often times the cost of the car that is on your mind at the end of the day. But what if you could buy the car for much lower than the dealer is advertising? I recently purchased a Toyota RAV4 from a dealer can say I spent a lot of time shopping around at nearby dealerships in search of the cheapest price. I entered the details of the car I wanted at sites like to set a baseline (if you're buying a car today, I'd highly recommend it to get a baseline). Even when I believe I found the dealership with the cheapest car, I'm still not 100% certain I didn't get ripped off, and that leaves me partially unhappy with my purchase as a drive off the dealer lot. Note this unhappiness has nothing to do with the salesperson, but rather the sales process.

Ever since Tesla began offering their high end all electric cars direct to consumers, Regardless of the Tesla store, every car can be purchased at exactly the same price. I've been wondering to myself. "why don't other car manufacturers sell using the same process"? I for one hate negotiating. In this information age, I end up doing most of the research on the car manufacturer's website. The only reason I need the dealer today is to see the car in-person and take a quick test drive. In fact, while test driving, I find that a majority (but not all) sellers are incapable of adequately answering any questions I have about the car. Perhaps back before the internet, the dealer was a more important step of the process where buyers learned everything there was to know about a car.

To be honest, the only purpose for a dealer in my opinion is to negotiate the price of a car. Car dealers are merely middlemen in the whole process who want a cut for themselves. Many buyers today have the ability to walk into a dealership already knowing the exact car make and model and trim. And the main problem for dealers is the challenge of knowing what price the dealer purchased the car. For starters, there is the MSRP (Manufacturer Suggested Retail Price) and then there is the Invoice (the price at which the dealer bought the car). And most car buyers base how well they negotiated for a car based on the final price in comparison to the Invoice. What is often times hidden (and difficult to decipher) is how much of a rebate the car dealer got from the manufacturer. From what I understand (from research), car dealers get a bigger rebate based on how many cars they sell. And this equates to how much profit the dealer makes, not the price you (the buy) gets the car priced. Not to mention many of the discounts you get during the holidays are rebates the dealer also gets from the manufacturer. In my opinion, buying new cars from a dealer is a rip-off, but you have no choice if you want a new car, thanks in part to legislation that forces us to buy cars from dealers.

So what is the law that forces us to buy dealers? From what I understand, it varies from State to State, but it's a law from the late 1990's that makes it a criminal offense for auto manufacturers to sell a new car to anyone without being a state licensed car dealer. To prevent changes to this rule, the dealerships use the political power of the lobbyists influence state lawmakers.

And this is one of the main reasons I support Tesla. Not only do they create a beautiful car with the technological advancements of all-electric power train, but they're pushing for changes to an antiquated system. By selling their car in the few states that allow for the direct sale of new cars, they are doing it, California included. But many lobbyists in the other States are actively pushing for legislation to prevent Tesla from moving in on their territory. Because if Tesla is allowed to sell without a dealer, it is only a matter of time before other big auto manufacturers like Toyota, Honda, BMW, Mercedes (just to name a few) being putting auto dealerships out of business. Therefore, it is in the best interest for car dealerships to prevent their inevitable extinction. Doing so would in my opinion greatly improve the car buying experiences for everyone.

As for Tesla, the current price of their Model S is far out of my price range, but if Tesla were to ever design and sell an affordable car to the masses, I would highly consider purchasing it directly from their official website. It is my hope that by cutting out all the middlemen, some of savings can be passed along to the buyer. And if other manufacturers begin selling their cars at one price across the nation without negotiating, I would absolutely consider their cars as well. I'm hoping the days of haggling/negotiating for a new car at an auto dealership are numbered.

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