In a new video, Sean Mitchell explains why he thinks the US auto dealership model is anti-American. Among other things, it gives privileges to dealers over consumers who may want to buy directly from the vehicle maker — such as Tesla. Sean has been actively supporting a new bill that would allow Colorado consumers to buy vehicles directly from manufacturers and completely skip the dealer. Sean points out that Tesla is the only manufacturer that is legally allowed to sell directly to consumers. Other manufacturers can’t due to a law change that was encouraged by the Colorado Automotive Association.
Sean quickly dives into the history of franchise laws and why they exist, going back to the time when dealerships were young. They involved heavy capital investments and operational costs, having to spend funds on things such as machinery and employees, so one thing they didn’t want to do was compete with the manufacturers that made the vehicles. The solution to that problem was to go to each state and lobby to create laws that would protect their business interests. Their argument to convince the lawmakers was that they were trying to protect consumers — to ensure competition and price.
At this point in time, the dealer industry is not a million-dollar industry, but a trillion-dollar industry. Yeah, we are just going to skip the billion-dollar mark. Sean also points to data from the National Automobile Dealers Association (NADA) that over $116 billion was generated due to repairs. This shows that the dealerships have a lot of authority and power when it comes to getting what they want, and this is why in some states it is illegal to buy a Tesla directly from Tesla.
How Dealerships Are Anti-American
What are you reading this article on? A phone, laptop, tablet? What about that coffee cup you are sipping from? People love to buy things and we hardly ever think about where our items come from. You can go to a variety of different stores to buy most of the items in your home, or can even buy online and have the goods delivered to your door. However, if you want to purchase a vehicle, you have very limited options. In fact, you can’t go to Toyota and just buy one from the company directly, you have to go through a dealership.
Further, if you are in a state that doesn’t allow you to buy from Tesla directly, you may have to go to another state to pick up your vehicle. Seriously. You can’t buy an American-made car from an American company in some states.
The more I learn about the dealer model, the less I like it…https://t.co/CWWPyIOqNM
— Sean Mitchell (@seanmmitchell) February 22, 2020
Imagine that you had to buy go to another state to buy an iPhone. Sounds extreme, right? This is America, you say, “I should be able to buy my phone from wherever I choose.”
Consumers are realizing this more and more as interest in Tesla grows. For most people, the dealership experience isn’t that great in the first place. Dealers are salespeople and they are all about hitting their monthly numbers.
I had a friend who sold furniture. She told me that her supervisor would write her up if she didn’t have a certain number of sales per day. Also, sales people like this often make a commission off of their sales, a core part of their income. If you bought a sectional for $1,500, about $300 of it went to the salesperson, while the cost of that sectional was probably around $400.
I had another friend who worked for a car dealership. She said it was pretty much the same thing: you had a certain number of sales you had to make, and you relied on commission from those sales. You got a bonus if you got the customer to sign a lease instead of buying outright. These salespeople were incentivized to do what helped themselves and the company, not necessarily what helped the customer (or, often, completely counter to what helped the customers).
In his video, Sean shares an ad that has been promoted by the National Auto Dealers Association. This ad promotes the idea that the dealers are there to help the average consumer with paperwork so they don’t have to. (My mother was a paralegal and her boss would always tell me never let someone do my paperwork and to always read everything before signing). The ad also promotes the idea that buying a new car is this hard, scary thing that you can’t do alone. The ad also says that the government set up these dealer franchise laws to protect consumers, when in fact it was the dealers who lobbied for these laws.
“You know what is un-American? It’s businesses lobbying legislators to create laws to protect them from competition and free market,” Sean says toward the end of his video.
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