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FTC Officials Back Tesla’s Right to Sell Cars Direct to Consumers (techcrunch.com)
428 points by prostoalex 950 days ago | hide | past | web | favorite | 207 comments



Having bought a new car recently, and having to drive 100 miles, past 4 dealerships, just to get to a dealership that was willing to give me a reasonable price (still high, but reasonable) for a car that is in low demand, I support every company's right to go around the dealerships. They are disgusting.

While sitting around waiting for 20 minutes "cooking" in a dealership waiting for the man to come back with a price for a used car, I heard 4 other salesman standing around, pretending to be customers, laughing and making fun of people who had come in to buy a car. Some pretended to be gangsters who had to "go geyt sum monnah frum muh baby mommah's couch". Another pretended to be school teachers who had to pay the down payment with 3 different checks. It was disgusting. I left after it was obvious that the man was making me wait for no reason, and when I left, he sent me a text message with a price for a base model, used car, for ABOVE the new price not 100 feet away from his desk, at the dealership next door.

It was a very abusive process. I've never been in another situation where you ask how much something costs, and they say "make an offer!"

That's like going into Walmart and asking how much a TV is, and they say "What's it worth to you?"

Gross. I felt like I was dealing with conmen from the start. I will never buy another car from a dealer.

Tesla has the power to lead the way into eliminating these middlemen monsters and I hope they see more support in that regard.

Note: I needed a pretty specific car because I'm extremely tall and I'm having back problems from having to slouch in normal sized cars. Because of this, I had limited options in the way of dealers.


Unless you're being forced to buy a car because of a wreck or something similar, you have to remember that you have 100% of the power. I've had salesman and "sales managers" laugh at my price and then chase me out as I walked out, only to call me a week later offering my price to which I told them was no longer good so it needed to be lower. I've had the finance guy literally not shaking my hand at the end of the deal and telling me never to buy a car there again (I had to correct his mistakes over and over). Buying a car is war, and if you approach it that way it can be quite amusing.

Some other stories, I had a friend when buying one of his cars it was a month long negotiation. I would be in his office, the phone would ring he would pick up say "No" and just hang up on the sales guy. Pretty hilarious actually.

Another friend walked into the dealership, money in hand and told the guy a price and that he had 45 minutes before he had to go back to work. He said it was awesome watching the salesman run all over the lot in the heat, but the deal got done.

If someone does not want to negotiate, CarMax is okay. The prices are not the best, but they are clearly shown online and the buying process is dead simple.


This is true. The buyer has all the power in a car purchase, especially for a sports car or motorcycle which are nonessential to daily life. I'll tell you two stories of acquaintances. One wanted a Lamborghini, so he researched what he wanted, drew up a letter to the dealer and included a cashier check for the price he was willing to pay, and a return envelope. Initially the dealer responded in the negative, but without returning the check. Six months later his car arrived.

I accompanied another friend to a motorcycle dealer. He had previously negotiated the price of the bike and brought cash in that amount. He puts the cash on the counter, and the salesman starts running this game about how the owner really likes that bike and doesn't want to sell it, except at a higher price, and all this. The buyer reaches into the giant stack of cash -- thousands of dollars in $20 bills always seems like a lot of money -- counts out a thousand dollars, and puts it in his pocket. He says the remaining amount of money is the most he's willing to pay after hearing the salesman's story. The salesman disappears, comes back and desperately tries to close the deal at the original price, but eventually has to settle for the money that's literally on the table.

There is almost nobody more desperate than a car salesman, so dealing with them is actually pretty easy.


I used to work at a car dealership as a title clerk. You are right about one thing: car salesmen are desperate. They're being conned just as much as the buyers are. Their ability to support their families is tied to their commission. At the dealership I worked at, the salesmen literally drew lots to see how much of their base salary they would have to pay to the company that month in "operating costs." The theory behind that one was to keep the salesmen keen to close sales.

That was my first job, but I've had dozens since and nowhere else have I seen such unambiguously shady and downright illegal behavior occur under one roof, almost entirely by the senior management and higher. The rank and file weren't too bad. Every one of them would tell me to learn all I could there, but go back to college so I wouldn't have to do what they did for a living.


Thanks for some perspective from the other side.

It's too easy to demonize people who I'm sure don't want to be engaging in this bullshit in the first place.

I'm sure there are sales staff who get off on shafting customers, but I don't think you can say it's all of em.


"Just doing my job/following orders." does not work as an excuse for their behavior. I will not do anything illegal to a sales person, but I find the only approach that safeguards yourself is to treat them as a being lacking empathy and with a distaste for anything truthful unless it benefits them.

Too many times I had to work with friends/family who were outright lied to by those desperate to close a sale.


I read Chandler Phillips' Confessions of a Car Salesman last year (originally published in 2009) and found it really interesting/telling:

http://www.edmunds.com/car-buying/confessions-of-a-car-sales...


As much as I would like to do this to a shady used car salesman, I'm hoping I will never need purchase a car again. I'm going to use public transport, biking, walking and carsharing until self-driving cars arrive. I'm sure many millennials are in the same boat.


Not sure if you've ever heard of Carmax, but it's designed to be the opposite of what you experienced.

I used them to basically order the car I wanted over the internet. I browsed their site, found the cheapest one in their inventory, and paid to have it shipped to my local Carmax. They called me to let me know the car was there and I went and test drove it. The price was set, so no haggling, and just friendly service. It was the best experience and probably the only way i'll buy a car again.

Check it out next time... it really was surprisingly good service...

ps. I've had the car for 6 years and ended up being an overall terrific buy...


If you buy slightly nicer luxury-ish vehicles (M-series BMW, E/S class Mercedes, Audi, Porsche) the extended warranties are unbeatable. It's nice getting a Porsche Cayman rebuilt for $150 deductible because you purchased a $4500 100,000 mile warranty. Jalopnik had a write-up on a guy who bought the much maligned Range Rover and basically recouped his purchase cost in 1 or 2 warranty-covered repairs.


My problem isn't so much with the car-buying process, it's with the concept of car ownership, full stop. I don't want to own a depreciating asset, deal with maintenance, parking, insurance and other costs. Most importantly, I believe in denser, more walk-able cities and I'm going to do my (small) part to make that happen by supporting alternative transport.


If you live in any modern city (not sure about the US though since the car culture is prevalent there in most places) you usually don't need a car for daily activities or going to work. But once you want to have 1) kids 2) a bigger place 3) some land instead of just an apartment, you will end up living farther from the city and having to own a car at some point, unless you have a very large income that can accommodate such standards of livings right inside the city.


I'm not a believer in kids=cars and I don't like to see it propagated, even if it's true for many Anericans. There was a feature in the New Tork Times in the last few weeks about how rapidly cargo biking is gaining popularity with families. I ride to school with my older child and there are half a dozen other families doing the same thing. Globally it is absurd to suggest that children require cars. It is a uniquely American perspective.


This kind of American exceptionalism is just as bad as the "we're the best at everything!" nonsense you see in American politics.

No way is "children require cars" a uniquely American perspective. I have a lot of in-laws in urban China and the ones who are now having children pretty much universally buy cars if they didn't already have them. I lived in France for several years and I don't think I knew anyone with children who didn't own a car. Look at just about any city on the planet and what do you see? Cars, cars, and more cars. Cars as far as the eye can see.

Car culture is not an American thing. It's a first world thing, where "first world" includes the wealthy parts of the third world too. Now, it's certainly possible that this is not necessary, but that's how it currently is all over the place. If you want to change it, you won't get anywhere if you think that it's somehow unique to a single country.


But is having more than one car per family common anywhere else on the planet than in United States?


Is having more than one car per family relevant to the question of whether having kids implies having a car?

In any case, it looks like the answer is more or less "yes." The difference in car ownership per capita is not that different between the US and many other first-world countries:

http://en.wikipedia.org/wiki/List_of_countries_by_vehicles_p...

But this counts a lot of vehicles we wouldn't consider "cars," like tractor trailers. If we just look at passenger vehicles, it seems that the US is nowhere near the top:

http://www.theatlantic.com/international/archive/2012/08/its...

The discrepancy is pretty big and this doesn't fit with what I'd have thought. Plus the source is not available. But other sources corroborate:

http://www.forbes.com/2008/07/30/energy-europe-automobiles-b...

http://www.nationmaster.com/country-info/stats/Transport/Pas...

http://www.acea.be/statistics/tag/category/passenger-car-fle...

So not only is the US not unique in being in love with cars, we're not even the most excessive at it. Maybe the next time somebody feels like getting all nationalistic about criticizing car culture, they'll point the finger at Italy, Germany, or France before they decide to aim for the US.


The Carnegie data at least was put together for the purposes of making a point about the size of the middle class and I believe a number of those pieces, in addition to The Atlantic, are making use of that data set.

From the comments to that article, there seem to be some questions around what vehicles exactly are being counted and whether the methodology is consistent from country to country (e.g. pickups are probably quite a bit more common in the US than in western Europe). You could also argue that per capita isn't really the best measure and you may consider adjusting for income measures, demographics, and urbanization.

That said, there's a stereotype of Americans as a car culture where people drive everywhere and western Europeans as living in the core of medieval cities and walking/biking/taking transit everyplace. And that stereotype doesn't hold up.


Thanks for the info. I was very convinced this is an US phenomenon. I stand corrected.


I learned something too! I knew we weren't alone but I just assumed we were the worst. Guess not.


Much of Western Europe (along with Japan) owns more cars per capita than the US does.

http://www.theatlantic.com/international/archive/2012/08/its...


> It is a uniquely American perspective.

Nope, in Japanese cities rents are very expensive, and if you want to have space for more than one kid you either need to start doing three jobs to afford a bigger place, or start packing and leave further away where a car is much more likely to be needed. You only have efficient public transportation inside the large metropolitan centers, once you are a little out of that, your options drop progressively.

Do the math.


> It is a uniquely American perspective.

Citation needed. Oh wait, there is none, because you are wrong.

You may get by with public transportation for commuting and taking the kids to school, but unless you want to get stuck at the house on weekends, you will need a car, unless you want to live in the city center.


> but unless you want to get stuck at the house on weekends, you will need a car, unless you want to live in the city center.

Sounds like a mostly American perspective to me. I'm Norwegian, living in the UK, with a 6 year old son. I did consider getting a drivers license (never felt the need for one before) when we had our son, and it was a bit tiresome when he was too little to walk, but I don't feel a need for it any more. Maybe I'll get a drivers license one day, but I don't bet on it (I'm 40 and have done just fine so far)

Certainly there are plenty of people in Europe and elsewhere who see a car as a nice convenience that becomes even nicer to have when you get a kid, but I don't know many people that see it as a necessity.


For one kid, I agree, it's doable. More than one and it becomes complicated.

And of course, since you never got a driver's license you don't know what you're missing (and works around it)

E.g.: you have to pay/ask for someone to get something slightly oversized (either a store delivery or get a taxi), and/or doesn't have access to cheaper stores.

Pet transportation is limited.

You're pretty much dependent on others to places not covered by public transportation (and of course, this limits where you can live, and convenient public transport nearby implies a more expensive place).

Of course, for some people this makes no difference, and things like Uber make it easier nowadays.


> Pet transportation is limited.

My local tram network has 2 types of tickets: (a) Adults or (b) Children/pets.


Good, now take your 20kg dog that is sick and can't move in it to the vet.


Do you live in a big (or bigger than average) city?

I live in the UK in a small town and can not imagine having kids but no car. Most of my friends find having a car is essential even without kids (though I prefer to not have a car unless 100% necessary).

On my own I am fine with public transport, but anything between walking around the village or going to a big city isn't really covered by public transport.


My sister has three children, zero cars and some (OK, about ten) bicycles, including a cargo bike and a couple of trailers. They live in Edinburgh, which has a fair to medium public transport network, and manages to survive. I've travelled around with them and the kids and it really isn't a big deal, including long-distance journeys involving trains. One thing that does require a car is getting to out-of-the-way locations, we had to rely on relatives with vehicles for a trip out to the Museum of Flight, about 20 miles away and not at all accessible by public transport. We could probably have used the 'City Car Club' (similar to 'ZipCar') for that, if really necessary, although with children you then need to provide appropriate car seats, which is a hassle.

Anyway, for day-to-day travel and commuting, even with children, cars are not required in a medium sized city like Edinburgh.

One interesting (albeit off-topic) point she and her husband made to me was that having kids in push-chairs/buggies suddenly makes you appreciate the issues that disabled people in wheelchairs must have all the time for access to buildings.


I have to confess I would find the idea of not having a drivers license pretty extraordinary. If I lived and worked somewhere like New York City or London, I could imagine not owning a car depending upon the exact circumstances, especially given the availability of short-term rentals like Zipcar these days.

But essentially depending upon others to get out of the city for the weekend to anyplace that isn't likely an other city? Or being able to travel to destinations outside of towns/cities without having someone along who can drive? I'd find it incredibly limiting. In fact, I'm in the midst of planning a couple of hiking weeks in the Pacific Northwest that would be utterly undoable without renting a car.

Whatever works for you of course. I just can't imagine it.


> unless you want to get stuck at the house on weekends, you will need a car, unless you want to live in the city center.

There are buses, trains and trams to the countryside.


Yes, usually on a limited or very limited schedule.

(With some notable exceptions like Germany)


If you're waiting for self-driving cars in the sense of ordering one from your phone to pick you up at an arbitrary location, I'm afraid you're going to be waiting a long time. The fact that autopilot systems seem to work pretty well on highways in good weather has IMO made a lot of people way way optimistic about robo-Uber arriving in timescales less than multiple decades.

I'd love to be wrong but there's a huge gap between works pretty well on highways and can negotiate city streets to an arbitrary location without a human present.


If you engineer your life to never need a car, you'll likewise always be in the position of power while buying one.


Yep, car free since 2010!


This has to be the best example of "cash talks" that I've ever heard. Definitely going to keep this one in my back pocket!



That "show the money" story is old school brutal all kinds of awesome. Thanks for sharing it.


" I've had the finance guy literally not shaking my hand at the end of the deal and telling me never to buy a car there again"

That's a very, very common scam. The "Finance Guy" (or the Sales Guy's Manager) - saying never come back again. Sometimes they'll even say how they screwed up, and lost money on this deal. Sometimes they say they may have to sue to get some money back...

It's all an absolute complete scam. Car Dealers have been doing this for 50+ years, and they pass down the techniques and drama to new sales teams. They will never, ever do a deal that they aren't completely happy with.

And the "mistakes" (also a super common technique) are almost always placed on the deal so that the person buying the car takes away satisfaction at having "fixed" tiny parts of the deal.

My cousin was a car dealer, and, while I love her to pieces, when she started talking about her job and their attitudes towards customers ("Buyers are liars"), I absolutely understood how just filling a role can change how you fundamentally behave (see: http://en.wikipedia.org/wiki/Stanford_prison_experiment for more details)

Your last scenario, btw - is actually the exact way to buy a vehicle from these jerks. Do the research, find the absolute best price, end of month/quarter/year dealer incentives included, and then find a dealer that's rated well for service - and give them a Yes/No offer, all in (including shipping, transfer, paperwork, whatever the hell they want to make up - you don't care, just as long as the bottom line is less than your number) - and a time limit. If they can't do the deal within the time limit, no drama or discussion, just go to dealer #2.


> They will never, ever do a deal that they aren't completely happy with

There was an episode of This American Life about car dealerships that everyone here should really listen to [1].

In that episode they did close deals where they were losing money, but hoping it would make them meet their monthly sales goal (set by the supplier), which would result in a bonus that would put them in the black.

[1] http://www.thisamericanlife.org/radio-archives/episode/513/1...


I hope others listen to this. Not that I would consider dealerships ethical but there's also some ignorance / baseless group hate that could stand to be corrected in this thread.


There's a good chunk about this in Cialdini's "Influence" for anyone that wants more detail.


In this case he actually was pissed. I had the price agreed to and the finance rate. Each step he tried to tack on higher rates, more fees, etc... all while only talking in payment amount. At the time I had a business calculator and could quickly do the math on my own to the point where he was yelling at me for telling him the payment was $1 too high.


> If someone does not want to negotiate, CarMax is okay. The prices are not the best, but they are clearly shown online and the buying process is dead simple.

You should revisit your first three paragraphs to understand why people are okay with Carmax's prices. Buying a car should not be war, it should not be a hassle, and you should not have to wonder the entire time how you're going to get screwed.

Disclaimer: I have bought over 11 cars from Carmax for myself and family; never once have I been dissatisfied. Next car is a Model S or X.


> You should revisit your first three paragraphs to understand why people are okay with Carmax's prices.

It's pretty simple, they're willing to pay extra to avoid negotiation

> Buying a car should not be war, it should not be a hassle, and you should not have to wonder the entire time how you're going to get screwed.

Why not? If you have a business idea ("it shouldnt be a hassle!") then go for it. But if you think negotiating is unfair, well, yeah, of course it's unfair. File that next to "The Spurs lost" and "I'm not married to a supermodel."


> But if you think negotiating is unfair, well, yeah, of course it's unfair. File that next to "The Spurs lost" and "I'm not married to a supermodel."

So you accept and encourage car salesmen to take advantage of people with poor negotiating skills (or people that are easily manipulated)? Do these people deserve to have their money taken from them, or does their lack of skill mean that they shouldn't be buying a car at all?


I guess my flippant answer is "Yes." My less flippant answer is that autos are one of the few personal purchases that US consumers usually have to negotiate a price for. (Of course, many people regularly negotiate as part of their jobs.)

"Should" car purchases be negotiations? Well, they aren't at all dealers or with all brands but it's the way things have evolved in the US generally. I don't consider it right or wrong in some general sense; it's just the way things are. And there are other options for those who choose not to negotiate although they probably won't be quite as good a deal as an aggressively negotiated and shopped around for purchase.


> "Should" car purchases be negotiations? Well, they aren't at all dealers or with all brands but it's the way things have evolved in the US generally. I don't consider it right or wrong in some general sense; it's just the way things are.

Not for too much longer.


Is there really a general trend for new cars to be purchased at a non-negotiable price, with standard non-negotiable financing, and with trade-in independent of the new car purchase? I can point to some examples (including but not limited to Tesla) where at least a "no haggle" price is the case but it doesn't seem particularly common. One thing is that, while a lot of people claim to dislike negotiating, those same people want to get a real or perceived "good deal."


There is not such a trend, for new cars. Remember that new cars are mostly sold by dealers who have exclusive territories. That gives dealers the freedom to pick a business model that maximizes dealer profits.


I agree with the principles of what you are saying; but practically speaking: where does one draws the line? How does that differs from everyday --most often misleading and pretty much fake-- Advertisement? How about mortgage? Surely that is nothing more than ripping off the poor.


In the US, people don't really haggle every day. It's not part of the culture. This stands in stark contrast to the experience of buying a car, which is something people are never going to do frequently enough to build up haggling skills. So it's really context dependent.

In a culture where people haggle constantly (or at least more frequently), then a larger portion of people will have the relevant skill set to navigate these waters. I guess you could "solve" it by building haggling into the culture, but you could also "solve" it by forcing car dealerships to normalize with the way that most other average purchases work.


Don't know much about mortgage, but advertising is clearly a legalized and glorified antisocial behaviour. Somehow lying and tricking people into parting with their money is a respactable occupation nowadays.


Both of those examples are objectively awful things, used by desperate people to attain control over others.


It's pretty simple, they're willing to pay extra to avoid negotiation

Negotiation costs time and stress. If one has more money than time and stress tolerance, it makes sense to pay to skip the negotiation.


You can very easily save a couple thousand dollars in negotiation. I understand the TVM, and I see the value in two ways:

1. I can sit around a dealer for a couple hours and save a couple thousand bucks: that's $500-$1k/hr. Pretty good (e.g., worth my time).

2. I get to practice my negotiation skills. This has gotten fun. And while I will likely never be in the position of negotiating for large amounts (e.g., sale of a business), in that instance a 10% delta could equate to hundreds of thousands of dollars.

I bought a pre-owned car a couple months ago from a high-end, reputable dealer. They pulled the "that guy over there is interested in the same car" trick. I was tempted to go over an introduce myself (should have). Instead I told them the color wasn't my first choice and they should sell to the other guy. I was told the manager came over to "say goodbye" (no he wasn't), so I stood up and put on my coat. We reached a deal. My wife was freaking out. It was fun.


I dont disagree, legit reason.


> Why not?

i'd say it means the market isn't being allowed to work or even exist in the first place, which is the whole point of this discussion. 'going for it' is exactly what the establishments are trying to keep Tesla from doing.


Yeah. As someone who's not used to negotiating regularly, especially at car level stakes (what else do people buy that's expensive, houses?) buying a car from a dealer was an experience.

The war analogy is apt. Burn every bridge. Don't just be ready to walk, walk. It's an all day process, but it can save you literally thousands of dollars. One of my old managers went to the lot, looked around for the least saleable car, and made a standing offer for it. They called back a couple of times with higher prices, he declined. Turns out at the end of the month, they have to make a quota and would take his deal.


My old roommate in college used to figure out the price he would pay, get a cashier's check for that amount made out to the dealer, and slowly start ripping it if they didn't give him the price. He ripped it in half at the first dealer and walked out, he got his price at the second dealer. All it cost him was the $20 to have two checks issued.


I've had good results just emailing a bunch of dealerships, so they can all see each other in the To field.


Me too, for the most part. I'd always ask for the "out the door" all-cash price, all taxes and fees included.

Two dealerships wasted my time by revealing more fees after I'd already driven out, but that was fine because there was another dealership with the same offer, and they stood by it.

Buying used, it seems like cars bought directly from the owner can be had for about $3k less. It costs dealerships a lot to inspect, clean, and warehouse cars, plus pay all their high pressure salesmen.


> you have to remember that you have 100% of the power

It's simply not how humans interact with each other. Every person I ever meet face to face has a significant power over my emotions.



Edgy.


I had a dealer chase me out and then call me back and then offer me to deliver the car and contract to my home but they were so rude earlier that I went somewhere else and ended up getting an even better deal...

thanks to http://www.truecar.com. I don't know if they still help you get a good deal, but I was able to use the best deal in my area from truecar.com and bring it to someone else that was closer to me and they beat that price. I'm not sure if I got a really good deal but I ended up paying less then MSRP with taxes and fees included, so I was happy.


Well that's fine, but they're just going to extort a sweet old lady to make up the difference.

Everyone paying the same price with no middlemen is my preferred model.


> Buying a car is war, and if you approach it that way it can be quite amusing.

Lol why is buying something a war? I've gotta say, things can seem pretty backwards sometimes in the US.


Haggling is a common buying strategy outside of America as well.


Other places might not favor the armed conflict metaphor quite so much though.


Haggling is not war.


War doesn't equal battle.

The best victory is the one in which you do not actually fight.


Both are conflicts between two (or more) parties in which the ultimate question at hand is how resources be allocated.

If one side chooses to play dirty, your options are to:

1. Concede the battle and lose.

2. Walk away.

3. Up your game and win the best possible deal.


The OP described the car buying process as a masochist's dream, with the endless waiting and the characteristic pricing mind games. You take the other end of the spectrum, making it a sort of sadist's paradise, watching salesmen panic and worry.

Isn't there a middle-ground? I don't want to abuse or be abused in some social game; I merely want a box with wheels to convey me from work to home and back.


CarMax is also decent if you want to sell a car with little hassle. You'll get less than you would privately, but it's so dang easy it's almost worth it.


Well, perhaps you haven't lived in another country where negotiation is behind nearly every transaction, even down to when the cops pull you over. I remember my Dad getting pulled over for driving with one hand in Argentina. The car had a manual transmission and there was no such law. After a short negotiation the cop got a few bucks and we where back on the road.

I love negotiating with car dealers. I know their game and can be as much of an asshole as they are. A few rules:

- Always tell them you have two hours to get out of there

- Set an alarm for 1 hour

- Give them hell if things are not moving by the hour mark get up and get out of the office. You need to be angry (non violent)

- I prefer to have 30% to 50% down payment if financing. Things move much faster this way.

- Do your research

- Do NOT EVER be in love with a particular car

- Do not inject emotion into the process. Think Jedi Knight.

- Do not tolerate delay techniques. Demand that the manager come out and close the deal, no stupid back and forth

- Be a bigger asshole, imagine you care about cockroaches more than them

- have fun

- Sorry ladies: Don't go in ther with your wife or girlfriends unless they agree to the rules of the game and not to inject emotion into the negotiations

- Drill it into your head: You don't have to buy that car that day.

It really sucks that this is the culture. It is what it is. You can either have fun with it or be a victim.


The other industry that's even worse at pricing is health care. Nearly every time I go in for something I'm either told it's covered, when it's not, or given a price that's completely wrong. My wife ends up spending 3 months after any medical procedure more than just a checkup fighting with billing departments and insurance.


The real tragedy of the health care industry is that as a consumer, you have practically zero ability to price procedures and materials and to select a competitive provider based on that price. Instead, you select a provider based on "does my insurance cover them yes/no". At least with car dealerships, you can make them fight to give you a better price than the guy across the street.

The insurance industry has practically eliminated the pressure of competition from the part of the medical industry that they care about, which allows them to effectively fix prices.


100% agreed. The time/money/stress burden this places on people is incredible.

IMO health care providers should be forced to charge one price, regardless of who's paying. That way it wouldn't take a lawyer and a quant to figure out with even 99% certainty what something will actually cost, and the insurance companies would each fight to lower prices for everyone.

It's totally nuts that there is no-one in, say, a hospital, who can tell you what you're going to pay for a given procedure. They can (sometimes) give you numbers, but they'll practically never even be what ends up on the bill, let alone what you'll personally pay.


I felt like I was dealing with conmen from the start.

You were. Salesmen, especially car salesmen, are bullshitters in the Harry G Frankfurt sense. They are indifferent to the truth. They will say whatever they need to say to get you to buy a car. Know this going in. I don't understand, though, why there is this idea that direct sales would result in a better deal.


>I don't understand, though, why there is this idea that direct sales would result in a better deal.

Middle-men are expensive. Using them, a few people will get better deals and a lot of people will get screwed.


Direct sales are better because the incentives are different. A bullshitting salesman who doesn't care about the truth can still make a big pile of money because there are a lot of car buyers out there, and for every customer he screws over, a new victim will walk in the door who doesn't know him from Adam.

Further, people understand that car dealers are independent entities, and that car salesmen are relatively independent actors within them. So if you get screwed over buying a car, you'll think "I'm never going back to Bob the salesman again" which he couldn't care less about because you're probably not buying another car for years, and he has plenty of fresh meat to feast on. At worst you'll think "I'm never going back to Steve's Honest Honda Sales again" which is a bit of a hit to Steve (assuming you tell your friends) but not a big deal.

If you bought directly from Honda they have a much greater interest in making your experience a good one. They want you to come back to them for your next car in five or ten years. They want you to recommend Honda to your friends and family. Even if those friends and family are in another city or even another country, your recommendation directly affects Honda's bottom line.

This won't eliminate scumbaggery, obviously. But it's bound to improve things.


>>I don't understand, though, why there is this idea that direct sales would result in a better deal.

If direct sales were possible, dealerships would have to offer better prices or go out of business. If I could order a Honda Civic from honda.com directly for $20k, that gives me a good base bargaining position in the dealership. As it is we have the nebulous concept of the MSRP, which isn't very helpful.


This story about life on the other side of the fence has been posted on HN a few times, and it's still a good read:

http://www.edmunds.com/car-buying/confessions-of-a-car-sales... (2000)

http://www.edmunds.com/car-buying/confessions-of-a-car-sales... (2009 update)


It was a very abusive process. I've never been in another situation where you ask how much something costs, and they say "make an offer!"

Corporate IT sales. Try to get a straight answer for buying 100 + Switches, Servers, etc. It's ridiculous. The only reason someone hides their pricing structure, is so they can over charge some people.

Very similar to the grocery store leaving bad fruit hidden out with the good fruit in hopes someone will buy it without checking.


> Corporate IT sales.

To the point where there's a /r/sysadmin weekly "Am I Getting Fucked Friday" thread where people can post quotes they're being given for hardware because there is no truecar.com for corp IT sales.

http://www.reddit.com/r/sysadmin/comments/35aipe/am_i_gettin...


Heck, I work at a vendor (professional services) and trying to get pricing for my own company's offerings is next to impossible. The best I can find is list price, but of course no one pays the list price so that's useless. The sales folks hesitate to state a price as well, saying that it varies. Of course it does.


CarMax. CarMax's entire purpose is to sell cars without this bullshit. Their prices are on average higher than what you could get by negotiating with a dealership, but if you don't want to play these games, CarMax is for you. They'll also move cars around between their locations (for a fee) if you're looking for something obscure.


It's a game. I think some dealerships, in some areas, secretly set prices? Most of my vechicle purchases have been under stress--I need a car for my commute Monday. All the stereotypes in buying a vechicle are correct.

Personally, I stay away from dealerships, and used car lots.

The only time I ever got a good deal at a dealerships is when I walked into a dealership on Van Ness Ave. There were all the usual cast of characters(Sales personnel). They were all checking out my friend. Yes--she is attractive, but they were like Wolfs. We were both hung over, and she needed a car for Monday. She has 20 grand she could spend. I used to sell cars in college, so I kinda knew the game. I told her we need to split up.

While they were fawning over my friend, I overheard a small fight in the back. A disgruntled guy came out and walked right over to me and said, "I hate this fu--ing place. I moving to Oregon tomorrow with my girlfriend." I called my friend over. The $22,000 black Honda she was about to buy was dropped down to 15,000 out the door with the assistance of the disgruntled salesman. The car was stolen a month later.

She ended up paying $25,000 for the same car at a different dealership. I sometimes wonder if I was conned with the fight in the back room, but it was a good deal? And the guy should go into acting--if it was all set up?

(I miss you WH! I wish we were still friends! My email is on the Internet.)


I don't.

With a manufacturer direct sale you don't know what a reasonable price because they would never have to tiers of pricing which could be found out and exposed as so called "invoice" and similar pricing is done with regular car dealers.

I also do not support direct sales where dealerships have throughout the years established the brand in question. Now for new brands who are wholly unrelated to a current established brand I take no issue with. However to say that GM or Ford should be able to bypass the dealership model which they already abuse with must carry and demo rules would not be remotely fair as the customer relationships were established not by GM or Ford but instead by the dealers.

However I do not support the idea that manufacturers or their assigned dealerships should be the only businesses who can repair or service any part of a vehicle.

As for car buying, doing it this week. Never once in thirty years and a dozen cars or motorcycles have I ever had an issue buying or selling car. The majority of horror stories come from used dealerships serving people who cannot afford down payments or the like.

tl;dr

dealerships helped establish brand loyalty for older car makers and that investment needs some protection from poaching of customers

with a manufacturer direct model you never know if you are getting a deal and have convince yourself irrationally that you are


> With a manufacturer direct sale you don't know what a reasonable price because they would never have to tiers of pricing which could be found out and exposed as so called "invoice" and similar pricing is done with regular car dealers.

Right, but it would eliminate overhead and economics says that reduces cost because Ford isn't going for maximum profits, it is going for acceptable profits in the marketplace.

My particular issue of needing a particular model aside, the manufacturers are still competing with manufacturers. If Tesla has done nothing else, he has shown that if there is a niche that isn't being filled by the manufacturers, that startup can compete.

If the manufacturers overprice their cars, they create a niche for someone to move in on. Their current pricing model reflects this, but the dealership era is the past. They came about when car companies were going out of business all of the time and people wanted to deal with someone who had been in their town for a long time. They wanted to buy the exact something they could see and warranties were nearly useless.

Now we have the internet. If Ford screws someone over in Florida, California hears about it the same day.

Because of the competition that the internet has created, dealerships have had to move closer and closer to a 3% profit on sales or lose business. This has put many dealers out of business already. It is only a matter of time. I hope.


I don't consider it a "horror story" but I did end up shopping around for my last car, including a trip to the closest dealership.

Selling me a car would have been a great deal for those guys as my wife insisted that we do every repair at the dealership. Trust me the purchase price was nothing next to the maintenance outlay over the following decade for that lemon.

Still the guys closest to me when presented with the paperwork from another dealership for an already closed deal and the question "Would you care to match this price for another one?" started the "OK, cool your jets here while we go talk about nothing in the ``manager's'' office for twenty minutes" game.

I walked out and bought at the next closest dealership which gladly accepted the deal. It was simple math. As an hourly contractor those guys were literally taking money out of my pocket every minute they wasted.


Price discovery for directly sold cars would work as it does in any other industry, through competition. If Brand X sells a car for $PRICE while Brand Y sells a basically identical car for $PRICE * 0.75, that discrepancy won't last long.

And really, that's how it works now, it's just more difficult. "Invoice" price is a lie that the car manufacturers and dealers collaborate on to screw you. It does not reflect the actual cost to the dealer in any way. The only reason that number exists is to make you feel like you got such a good deal that you fleeced the dealer, while they laugh all the way to the bank.


Unrelated to the discussion on dealerships, but a note on your height - I'm 6'10" with a 39" inseam and three kids. As you can imagine, my options are limited. The wife and I bought a Kia Soul a couple of years ago, and it's been wonderful. It's not astoundingly roomy overall, but I have plenty of head and leg room, and it's comfortable even with three car seats in the back. Good gas mileage, not very expensive, and trivial to maintain.


That sounds very much like some of the recruiters or HR folks asking "what will you work for" while sounding all shocked if you ask them to pay market rate or even worse if you ask what their budget is..

There must be some sort of way to disrupt this whole price negotiation shenanigans. Whoever has more information should be obliged to name the price.


> I've never been in another situation where you ask how much something costs, and they say "make an offer!"

I'm vaguely aware of one single other place this happens: street-walker prostitutes. The parallel is pretty solid, actually.


This happened to me all the time when I was looking for a server colocation facility, except the phrasing was slightly different - "what's your budget?"


That's why I, in all honesty, consider prostitution a more respectable occupation than telemarketing - in the former case, both parties engage in voluntary trade and leave happy. In the latter, one party preys on unwilling and gullible, trying to take their money while giving them suboptimal-to-useless crap.


What about auctions? Or lunch trades among school children? I believe that in both of those it is common for the seller to ask the buyer to make the first price offer.


The big difference, of course, being that when you get screwed by a prostitute, you leave happy.


I think this is, happily, becoming a myth. The transparency of the internet and the ease of owner to owner sales is making the used-car market more efficient. It is easier now for consumers to know the value of a vehicle. If you are treated poorly or over-quoted at a dealership, hopefully you are in a position to just leave (like the parent). Fighting the "war", even if you win, is still supporting the old model. Keep in mind that it sucks for the salesperson, too, at these sorts of dealerships.

I recently bought my first used car since 2007. The first dealership I went to is still in the past: "You know, before you go, I've just remembered I've got another one in the back that would be perfect for you....", overpriced, etc. The second dealership I went to simply pointed us toward the computer with a searchable inventory with all the information about the cars, prices, and additional fees explained. The way a purchase should be. Knowing the value of the vehicle beforehand made it easy know the additional cost due to the convenience of not searching on craigslist for weeks and weeks for some random "best deal", and driving out of the lot that day with a clean, serviced vehicle.


Did you have to go to a dealer? I've stopped buying from dealers almost entirely, and have shifted to purchasing used directly from other owners via craigslist. (I'm a little confused because you talked about used and new in your post.)

Of the past 5 cars I've bought, only one was from a dealership: a certified pre-owned Audi, that was two years old at the time I got it. Still sure I got robbed, but it wasn't by too much.


This is the best way. New cars, even when you negotiate a great price, are a terrible value when you consider depreciation. I buy used always now, generally at least 5 years old. The majority of the depreciation had been realized, insurance is cheaper, in many states registration is cheaper also. Never been unhappy.


Lucking out with repairs? A 5+ year old car won't be offered under a certified pre-owned program, but a 2-3 year old one will. That gets you another 5 years (7 years from the in-service date) and 100K miles under warranty. My last used car needed a new transmission, serpentine belt, water pump and alternator... and all of it was replaced under warranty, with door-to-door pickup and rental cars. When that 7 year warranty came to an end, I sold the car, took $2K and bought another 2-year-old car with the fully loaded trim. That works out to ~$400/year, with the same benefits of buying used versus new, but having a factory warranty brings a lot of peace of mind.


Certified pre-owned may have a warranty, but the "certified pre-owned" part is just a fancy way of saying used. And there's often nothing "certified" about them at all. A friend of mine in CA just purchased a "certified pre-owned" Honda 2 days ago... quite a bit of extra cash for a "182 point rigorous checklist" they do to ensure the car is in great working order. Over a dozen of those 182 points were skipped. So, all kinds of things marked as verified working that are just broken.


Certified pre-owned is a fancy way of saying "used, with a 7 year drivetrain warranty from the manufacturer", which is a lot different than "used and those broken things are your problem now". The checklist isn't the point.


Honda advertises it as being sure that everything on this huge checklist is double-checked and ensured to be working properly before you buy it. The salespeople specifically tell you that. My point is that ads and salespeople lie (surprise) and the "certified" bit doesn't mean anything.


[deleted]


I'm not discounting having a warranty. You can get a warranty on a used car from all sorts of places. Certified Pre-Owned is defined by Honda (and many others) to specifically have the advantage of not having specific things broken when you buy a car. That's what the "certified" part is. That's the whole reason they mention, specifically, the 182 point certification check. It's one of the main reasons my friend paid all the extra money for a certified pre-owned car vs getting the same basic car "used" elsewhere. My point is that the "certified" bit is mostly BS. And not just at Honda. You're still likely to get a car with a bunch of broken stuff when it's "certified".


Depends on how long you keep the car. I drove my last car for 13 years (still have it actually, haven't sold it yet). I just bought a new replacement. The warranty and low mileage are worth a lot when you plan to keep the car for a long time. Lifetime warranty's are also worth considering if you are in it for the long haul (usually only available for original owner).

If you buy used, you really don't know what you are getting. If you want to play backyard mechanic, go for it. Me, I just want my car to work.


This and you know the maintenance was done properly if you're the sort of person to regularly do maintenance.

I've bought this sort of car off someone it lasted twenty years (I drove it for eight) because both the previous owner and myself were on the same page about repairing and protecting it.


You must have been really lucky with repairs. We have a fleet of cars at work and until 7 years ago we always used to buy cars which were 3-4 years old, using the same logic as yours - most of the value that should be gone is gone, insurance is cheaper, whatever. We made the switch to only new cars on lease and having all repairs done under new car warranty saves us TONS of money per year. I personally never want to bother with a used car again.


how do you know if a car has a problem that's not easy to detect? i've had friends selling their cars right after when they discovered there was some weird problem with their cars, and since I don't really know cars I'd be interested to know how I can not get scammed when buying used car


I recently purchased a used 2004 Honda S2000 with 33k miles on it. I went to the S2000 community/forums and they had a huge pre-buying checklist. After buying it (had 5 days to return it hassle free), I went to a Honda dealership for pre-purchase inspection and a body repair shop for inspecting off the record accidents (not on carfax). Finally, I wouldn't buy a car that didn't have a strong forum presence with DIY guides for repairs.

http://www.s2ki.com/s2000/topic/775801-what-to-look-for-when...


model-specific forum is a good idea, thanks!


If you can do private deals, not through a lot, or worse the wholesalers...

One great way to filter this is to understand why they are selling the car. Good reasons lead to good cars.

-no longer needed, change in family scenario -business car sold every X miles

Those were the reasons I got when buying my daily runner vehicle. The guy would buy cars with his rental company, which then rented them to his business. Maintenance and all that got done on the vehicles on schedule, and when it's time to cycle out the vehicle for a new one, he sells.

So far, I've got 150K of my miles on that vehicle, and it was maintained, full dealer service, which I kept up on. One of the best used deals I've had so far. Since I've all the records, I know I've got some basics to get done in the next 50K. No big deal.

Another thing to do is research the models and overall performance. Calling in the service departments, or your local mechanic can yield some good info.

I just got another used car to become the daily runner. Reason was a death in a family, car no longer needed. That's a potentially good reason.

Turns out that model of car was released as a V6 and V4. The V6 is an outstanding runner with few problems and a modest maintenance schedule. The V4 is just pissy, not the same kind of car. I got the V6, and will need to have some preventative maintenance done in the next year or so. The prior owner kept up on that with service records.

This is a no brainer to continue. I'll have my mechanic take a good look, and recommend the "make it go 80K" with few hassles work. This will probably cost $1K or so. Given the price of the car, the total investment is well worth it.

Both of those work well for cars less than 10 years old and under 100K miles or so.

For newer ones, it's a bit harder because the failure data might not be out there yet. I tend to avoid that scenario, buying new, or buying old enough to make getting the necessary things done totally worth it.

Some older vehicles are more or less time tested. I have one of those too. It's the backup car that costs me almost nothing. I loan it out sometimes too, if somebody needs a runner for a short time. It's long paid for, runs great, and just isn't worth much, so it's all low risk. I have 360K miles on that old car. Paid $1500, and $500 or so every few years to maintain. That was my rainy day, "have to get there" or "they need to get there" car, and it has served us well. That model is known for very long service life, and the purchase reasons?

-damaged front axle due to accident -they got new car

In every other way, that car was perfectly maintained. The guy I got it from did the axle work, and sold it cheap as a runner, due to it's cosmetics. Wonderful purchase!

To me, that under 5 years old used market is where a lot of the risk is. Buying ones that are 5 to 10 years old, where the reason for selling the car makes sense, the driver / maintenance profile is sane, etc... is much lower risk.

Additionally, the lower overall costs in that range mean there is plenty of room to invest a little common sense maintenance without feeling like it's all too much money. So, that's my sweet spot. I really don't value higher end / expensive cars enough to own them.

They sure are fun to gawk at and drive once in a while though!


thanks for the detailed reply, i'll have a lot of research to do!


It helps to identify type of car. The less picky you are, the better this all works.

What I've typically done is identify something like:

-small engine, high reliability, good MPG, clean.

For cars, 4-10 years old, you can set a price, say $2500. This will put you in a reasonable age range, as that price is low enough to filter out returns, newer vehicles. Set a minimum of $2k. Double all of that for nicer cars that aren't just runners.

Hit craigslist, and friends to find some cars. Research a few of those, and you will center in on one you like.

Then drill down on that car, looking for plausible deals. Call 'em, get their reasons, go visit, talk to them to judge who you are buying from, see the car, and go from there.

It's perfectly ordinary to get a car inspected. You can arrange that ahead of time with your mechanic. Figure out a deposit, or whatever makes sense.

Got a friend who can test drive? That helps too. There are a number of things I do on a test that helps filter out problems. I'll put a couple here:

1. Start the car and let it idle for a long time, until it comes up to operating temp. This takes 10-15 minutes. If it acts irregular, dies, begins to run rough, smokes, it's probably got some issues. Continue, until the fan comes on.

While it's idling, lift the hood, examine things. If it sounds funny or odd, it is. If you see leaks, there are. Simple common sense things here.

2. Get in the car, blast the heat. It should be right there, hot.

3. Blast the AC, if it has it. Should be there, cool in about a minute.

4. With a friend, try everything out. Lights, features, radio, whatever. Test all the electric options.

5. Time to drive the car. Take it out on the road and drive normally for a bit. It should perform like a reasonable car.

6. Find a long stretch of road, put the car in second gear, then drive about 30 MPH for a good mile or two. This will stress the engine, and doing this will filter out cooling system issues, and the engine should be smooth.

7. Exercise the car. Speed up, and use the brakes hard. If it's got ABS, that system should trigger.

8. Take some corners, handle the car a little. Make sure you go fast enough, say 70 MPH, and it should not shake or shimmy.


very detailed, thanks a lot!


> It was a very abusive process. I've never been in another situation where you ask how much something costs, and they say "make an offer!"

What you're describing is a problem with sales people, not the dealership model. Generally, when you have sales people who make commission and who have price flexibility, you will get this type of attitude.

Assume we cut dealerships out of the equation tomorrow, what makes you think the manufacturer won't have the same sales people on the floor pushing the product?

What you're looking for is a fixed retail price on the product, so you don't have to worry about negotiations. Tesla happens to have that but not all manufacturers would necessarily make the same choice.


So build the alternative. Build a way for consumers to make bids/offers (put the money in escrow) and allow verified dealers to bid for your offer. You want a 2010 Honda Accord for $8500? Put up the cash and let reputable dealers compete.


I think it's pretty nice that there are all these stores I can drive to where I can sell and buy a car in couple hours. That's risky buisiness-wise and most manufactures enjoy not taking that on directly. There are no haggle dealerships out there, you might like those more, and if the car you are interested in is low demand you should get a decent price there for one. Might be worth the less stress to you, won't make much of a difference month to month.


I'm no particular fan of the car buying experience although if you can take both financing and trade-in totally out of the equation--and have done your research--it gets a lot easier. You're also right that there are no haggle dealers and brands. When I bought one of my current vehicles (about 15 years ago now!) I test drove a couple different variants and the purchase process probably took less than an hour at a no haggle dealer that was selling the car at just about dealer cost according to Consumer Reports.


If you don't want to deal with the haggling then I have found two good options:

My bank offers pre negotiated prices on new cars that are decent and well under the sticker price.

You can also get the current Consumer Reporte car guide and walk in with that in your hand. It has the invoice price and recommends a fair price for each model. This gives you a much stronger position.


Costco offers a similar negotiation service. The prices are good, but it is limited to fairly popular models and specific dealers. It seems like a good tradeoff if you find the usual negotiation painful.


Your story exactly covers the house buying process in Auckland, New Zealand. "What's do you think it is worth" is usually the first thing that is said. This is in a market with 20% appreciation in the last year, and still the agents behave disgustingly. Who else can say their industry has that sort of price inflation?


VCs.


I have a friend who wanted a new BMW at a given price. He faxed his offer to every dealership in the state. He didn't hear back from most, he got a counter offer from a few and one in El Paso, TX accepted his deal.

And then there was the dealership in Houston (his town) that took the time to write "HA HA HA!!" and fax his offer back.

Despite the distance he drove to El Paso.


The least evil option I found was a no-negotiations dealer. I'm sure I lost out by some percent but my sanity is worth it to me.


Do US dealers not display starting prices on the vehicle? The standard way of doing things in Australia is every car has a clearly marked price and then you see how much you can knock that down in negotiations, or you could just pay that listed price.


Yes, they have a "Starting Price", and it is just complete fiction that you can safely ignore. Even the dealer invoice is a number that isn't particularly relevant to the conversation, because it doesn't take into account dealer incentives/kickbacks/bonus kickers.

A dealer can sell a car they paid $30,000 for for $25,000 and still make $5,000 on the deal once everything is considered - it's just a lot of the additional revenue is very indirect, and not at all easy to associate with any particular vehicle.

And, negotiations with car dealers is frustrating, because they will waste your time, and frequently insist they have to go talk with their "Manager", or "The VP of Sales", or "Call the head office to get permission to make an exception on this deal, because they need it to make quota" or whatever bullshit they are spinning that particular day.

If you want to make your life simple, just go to CarMax. Alternatively, if you really like playing this idiotic car dealer game, then do a couple days research on the net, research the best prices that other people have paid, taking into account timing around end of month/quarter/year, factor in when the new model may be coming out as well - set your price - and then just offer it with a yes/no to dealers, starting with your favorite dealer, and working your way down.


There are starting prices, but the negotiating process is so arcane and twisted that it really only establishes a rough ballpark. Car salesmen are notorious for slipping in extra charges and making "math mistakes" that they benefit from if you don't catch them before signing your agreement to them. They will push very hard to let their lending partners finance a car loan for you, offering incentives which lower the apparent price, but which generally end up costing the buyer more in the long end. Their business is built on cheating their customers, and it's disgusting. They can get away with it because many buyers don't have much in the way of alternatives.

Car buying in the US is a really miserable experience. I'd be cheering for Tesla to succeed if for no other reason than that it helps to put the existing dealerships out of business.


The listed price on some vehicles is total fiction. Like for full-size pickups. Twist the salesman's arm just a tiny bit, and they'll come down $8,000 or more on price.

Which says to me the truck was never worth what they were asking. And that makes me suspicious about just how good a truck it might be -- did they use a bunch of cheap parts that let them drop the price that much, that easily?


The worst is when I get taken to the back room and they beg and plead for me to get some extra insurance on the car for $1000 or so. Hate the process of having to buy cars.


I only buy privately now. If I'm ever in the market for a new car not sure what I'd do. Maybe I'll go tesla lol.


I wonder why this model was created in the first place.


Given there was a time when cars were (proportionately) more expensive, much less reliable, and mergers of companies were more common, requiring a dealer network to avoid you getting a very expensive dud probably seemed an attractive idea to the public.


And now vehicles cost almost 10% more [1] due to the banning of direct sales.

[1] http://www.justice.gov/atr/public/eag/246374.htm


More precisely though, those potential cost savings are primarily attributed to shifting from a build-to-stock to a build-to-order model, which at least in principle could be done with existing franchised dealerships. That paper also found that dealerships didn't consistently make money on new car sales. They make a lot more from service and parts.


I am talking about the pricing model in particular though.


Here's the industry voice defending it (with admittedly weak arguments)

http://wardsauto.com/industry-voices/answers-faqs-about-why-...

Manufacturer, in theory, could pull out and close down the shops during financial downturns (which with US companies seems to happen every few years), leaving a bunch of owners stranded on service and spare parts (in pre-Internet days). A local dealer would be financially independent from the manufacturer, and provide needed liquidity for the car maker, the theory goes.


This made sense when automobiles were new and the infrastructure wasn't heavily established, but that's no longer the case. Now, car support infrastructure is so ubiquitous that you could wipe every dealership off the face of the planet and people would still be able to get their cars repaired. Even ignoring the independent mechanics, it's in the manufacturer's long-term interest to ensure that their customers have support for their product, since a customer who can't get their $MAKE repaired isn't going to buy another $MAKE in the future. Even if they pulled out of a market, they would almost certainly ensure some form of continuing support.


Yep, even the longevity argument is no longer valid - where are the local guys who will support my Mitsubishi and Suzuki after the respective manufacturers pulled out of the US market?


Because it's highly lucrative.

Selling an automobile based on a list price offers less potential for profit than all of the other things that dealerships do. They find numerous ways to milk customers out of money during a sale by jacking up the price of the car or shafting people on trade-in value. Aside from that there's financing and dealership servicing, both of which can come show high profit margins.


Regulatory capture is a thing.


> Tesla has the power to lead the way into eliminating these middlemen monsters and I hope they see more support in that regard.

arguably... Craiglist has led the way, and earlier.

do you want to see ads from dealers? or from private owners? or both? your choice


Not a single mention of "service."

The FTC, TechCrunch, and the mainstream media are ignoring another aspect of the protectionist legislation that is put in front of Tesla customers: not only can't you BUY a car in a number of states, you can't get SERVICE on one either.

For example: New Mexico. The NMADA (New Mexico Automobile Dealers Assocation) has made sure there are laws on the books that make it impossible for Tesla to not only open a store in the state, but also they can't open a service center. Even though on Tesla's own website it shows a map with a "Coming Soon" icon for a service center in Albuquerque, it really isn't coming any time soon because the law forbids Tesla from opening a service center. So owners in New Mexico are kinda screwed. Some of them don't even realize it. If you are a Tesla owner in NM, and you need service some day, you have to call Tesla and have a service person come from either Phoenix, AZ or Denver, CO -- 7+ hours away by interstate. And if your car has to be taken back to one of those service centers, you're looking at significant expense because of the flatbed transportation. Not to mention hassle.

All this to protect a bunch of sleazy old boy network car dealers who don't want Tesla educating the New Mexico public about how bad they have it with dealerships and service centers.

I wish the FTC would talk about the service angle as well.


> you're looking at significant expense because of the flatbed transportation. Not to mention hassle.

Is it stated anywhere that this is what will happen, and the customer will be liable for the cost?


Our experience at the Tesla store was quite pleasant.

The ordering experience was literally walking to an mac in the back part of the store and bringing up teslamotors.com.

No paperwork, or shenanigans. We were actually talked down from a few options we were thinking of based on the sales person saying that they weren't quite worth the cost if it wasn't something you were interested in(leather seats, winter package).

Closest experience I've had was when I bought a Saturn ages ago. No hassle, just here's the price and features we offer.

Detroit better look out because if Elon has his way Tesla is going to eat their lunch.


Yes, you are absolutely right. But in case it isn't obvious to everyone already:

1. Detroit as a city, and the industry that built it, is dead and gone. Nothing will bring it back. The auto dealership network across the US has tried to adapt to changing technology too many times to count, and apparently is still waaay behind.

2. Tesla _might_ not successfully disrupt the auto industry, all by themselves. But like sharks, once there's blood in the water, it's only a matter of time. Many businesses want a piece of the US auto market -- and I mean "want" like a shark wants its next meal. I personally think Tesla is here for the long haul and has a huge first-mover advantage.

3. The only question is what this means for the infrastructure. Refueling stations. Brick and mortar parts stores. Parts websites. Tooling industries. Inspection and emissions and repair businesses, both brick and mortar and online. Imports. Dealerships. Financing. Fleet management. Warranties. Lawsuits. US Department of Transportation regulations and the political power structure that surrounds it.

Tesla will almost certainly make some mistakes. But so far the trend has been extremely positive.


Detroit, as a city, is neither dead nor gone.


What possible reason, from anyone's perspective, is there to say it's not OK for Tesla to sell their own products to people?

Is this literally 100% because the US is so corrupt that car dealers are just making laws that make them money? Or is there a sliver of an argument here that has merit?

I neither live in the US nor own a car, so the idea that Toyota can't tell you a Toyota or whatever is bewildering.


It's part of an old set of laws that were put in place to protect dealers. It kept a manufacturer from selling a market to a dealership, allowing that dealership to expand the market in the area for them and then moving into that market on their own.

Meaning, Ford sells a dealership the Los Angeles region. The dealer spends money advertising how great Fords are in the local market. Sales go up. Ford decides to open its own dealership in Los Angeles and compete directly with that dealership.

The law was useful a long time ago. However, it shouldn't apply to manufacturers who don't have dealerships that need protection. Entrenched businesses are using that law to keep out competition.


Thanks for the explanation, that makes sense.


It is because this (small) aspect of the US economy is so corrupt. There are a handful of other sectors characterized by this kind of economic rent, but they are generally uncommon here compared to most economies of the world.

So yes, it is a form of corruption, but it is not fair to characterize the entire US economy this way.


"A fundamental principle of competition is that consumers – not regulation – should determine what they buy and how they buy it."

Hey how about that three-tier system for alcohol distribution? Perhaps that should go away too, yeah?


Before prohibition breweries owned the bars to the point sometimes you could only buy a single brand of beer for blocks to no end. That squeezed small breweries out of the market. When lifting prohibition, Congress created the tier system to prevent something like it from happening again.

Ken Burns' documentary about prohibition explains it really well.


That doesn't currently happen? I'm in Aus - so things are different - but certainly here there's an awful lot of pubs with only the one mega brewers beers on tap (aka - either SABMiller or Lion Nathan). In the same ways that most smaller stores have either coke or pepsi but not both. They are not forced they are just incentivised.


I suspect if a brewery took this too far, they might be up for anti-competitive behavior related charges.


I've never seen anything like that in the U.S.


Do coke and pepsi do it with smaller stores?

It's not that it's only one brand of beer. It's just that of the 10 options - they're all owned by the same mega corp.


Sure, maybe there were rare situations where this happened but the truth is that before prohibition there were more breweries than we currently have even today[1]. These breweries were in larger towns and they cooperated with farmers in a tightly nit ecosystem:

grain from farmers -> make beer -> spent grain back to farmers to feed cattle

I fail to believe that "competition" was a problem because the infrastructure required to distribute beer far enough to kill the competition did not exist. Yes, perhaps the brewery and bar were owned by the same person and they didn't allow the competition's beer, but there were no laws stopping the other brewery from opening their own bar.

And the fact is that today every brewpub I've ever been to has guest taps and beer from other breweries. I've never been somewhere that refuses to sell anything but their own.

The real problem today is that thanks to the three-tier system being completely controlled by MillerCoors/InBev it is VERY difficult to get your new product into bars and stores. The documentary Beer Wars[2] covers this very well -- better than I could in this posting.

tl;dr three-tier may have served a purpose 75 years ago, but it has been holding back competition and hurting consumers for at least 50 years.

(At one point large towns also had their own local mayonnaise, too!)

[1] https://www.brewersassociation.org/statistics/number-of-brew... [2] http://www.imdb.com/title/tt1326194/


Why shouldn't a company be able to produce and sell it's own product?


Its a problem for society when that company has the resources to make sure its products are the only ones sold for 50 miles.


Any examples of that occurring?


The automobile industry should be a: "sell car -> build car" business model. Eliminating the vast majority of inventory, and limiting damage from failed products.

It's absurd in premise that you can go to a dealership and look at a hundred vehicles; six of each make, of varying colors - all sitting there, with the dealership and the automaker praying they get sold.

Keep one of each model for viewing and test driving. Take orders and customizations. Pick your vehicle up in a week, save 15% (thanks to vast reduction in waste, and the elimination of the middle-man sales commission).

I had a conversation with the publisher of Forbes almost 20 years ago about this concept. It's sad so little progress has been made in that time.


It's possible to get a custom order car right now, and if you tried buying one, you'd know why it sucks. It takes much longer than a week to get the car, try several months, and that won't magically change, it just can't. Considering that it takes over 45 hours of non-stop driving to go from Orlando to Seattle (chose a southeast point and northwest point to show how long it takes at its worst), you can see how a week might be a stretch. It would take two of those days non-stop in best conditions, leaving you with 5 days to build the car.

Hell, even buying a Tesla means you have to wait a month or two for your new car to arrive.


Teslas take a month or two just because they're backlogged. The actual production time is not that great. The total time between my car entering production in the factory and being available for me to pick up on the east coast was 12 days, of which 6 was the actual building and 6 was transporting it across the country. A week might be a stretch, but two is conceivable, and three should be quite practical. "Several months" certainly could be reduced substantially for cars that don't need to be shipped over an ocean.


I'm not sure how many people would be willing to wait a week, when the competition has cars ready to go on the lot, that you can test before you buy (so you know it's not DOA).

Many car purchases are made when the old car is dead, and it's hard to wait a week in that case. Plus a week is probably optimistic for production, and if assembled overseas, delivery is also going to be lengthy.


If these stupid laws about direct sales weren't in place I could very well imagine someone restarting manufacturing in Detroit or some other fallen place (definitely in the USA!) and doing build-on-demand.


You mean like Tesla restarting production in the fallen Nummi plant, and doing build-on-demand? The plant was cheap because it was basically abandoned.


US state and local politics make much more sense when you realize that in any given area, the two most powerful political interests are likely to be car dealerships and real estate developers.


An interesting thing to me, is that car dealerships start off in what's usually the edge of town (where lot space is cheapest), but are usually the last thing to go when a city expands and the area around the car lot gentrifies. It's an odd effect, that I assume has to do with the dealership managing to keep its rent down by hook or by crook.


Now that you mention it, that certainly does seem to be a pattern.

Perhaps, as a class that get a lot of practice in price negotiation, their land tends to be the most expensive to buy, so it's the last to be sold for development.


Cities are hesitant to get rid of car dealerships because they bring in lots of tax revenue.


Car dealers also tend to be the among biggest financial contributors to local politics, too.


This makes me wonder if there's clear statistical trends in municipal politics that pop out if you graph cities by number of car dealerships.

The information would be especially interesting near zero. I imagine, though, that it'd be hard to find a city in North America without any car dealerships, so it'd probably be easier to do an analysis on European countries with some cities that don't have cars at all.


> European countries with some cities that don't have cars at all.

I am not sure what cities that would be.


Venice is the only one I can think of right now. But it's definitely an outlier.


I wonder if Venice has similar stuff going on with boat dealers.



They buy a ton of ad space, so they have outsized political power... Screw with the candidate, the ads get cut back.

With cartel pricing, they also employ a lot of people with decent pay and little qualification. Dealerships are great places to dump political and other friends who need s job.


The former mayor of Arlington(Cowboys stadium) used to own multiple car dealerships in the city.


If you are purchasing a new car and don't love the negotiation game, check out Costco's auto program. I got a much lower price on a new car versus what truecar.com was offering. The downside was that not many dealers participate and you didn't get to see the price until you arrived at the dealer. You didn't have to commit to the purchase. Also, make sure to sell your old car as a separate transaction (preferably a private sale if you can) to minimize dealer hijinks.


Couldn't Tesla sell solely from a different state and just have a showroom in other cities? I thought that inter-state trade can't be hindered by states.


Tesla only has showrooms. Their stores are pretty much the same everywhere. There are no cars you can buy and drive off in.

In states where Tesla can sell direct to consumers, the showroom has sales people who can talk to you about buying a car, and sit next to you to answer questions as you do so at teslamotors.com.

In other states, the showroom does not have sales people. The staff can answer questions about the car, but not about purchasing (pricing, financing, etc). If you want to buy one, they direct you to visit teslamotors.com.

In no case are people in a state prevented from buying a Tesla car. The buying experience is the same everywhere: go to teslamotors.com, configure and order a car, and either pick it up or have it delivered to you after it's been manufactured.

As for the legal aspect, the federal government does have the ability to regulate interstate commerce, and federal law preempts state law. When there is no federal law, however, the states are free to regulate in that area. If Congress were to enact a law guaranteeing the right of manufacturers to sell direct to consumers, this would preempt the state laws prohibiting it, and Tesla could have sales people in all its showrooms. IANAL.


You're largely correct, but there are some pretty substantial differences in the experience.

First, Tesla does actually have some cars you can just buy and go. They're (currently?) the minority, but they're there. They're starting to sell used Teslas, and they also have "inventory cars" which are showroom, test drive, and loaner cars which have finished their corporate service and are ready to be sold.

Second, test drives are pretty key to the whole process (even if you can't test drive the specific car you buy, most people want to test the model) and even that gets caught up in this whole nonsense. Until recently, you couldn't even get a test drive in Virginia. I had to go into Maryland to try one out. Tesla had a showroom in Virginia but they couldn't even let you drive one, let alone sell you one.

Third, in states where they are allowed to sell, you can configure and purchase on site rather than online. The effect is the same, and they're basically just punching the order into the computer for you, but for people who prefer buying from a real person it can matter.

Fourth, taxes and registration are different depending on how you bought it. When I bought mine in Virginia, I had to take delivery in Maryland, and the sale was actually processed in DC. I had DC temporary tags, and I had to handle Virginia registration and pay Virginia sales tax on my own at the DMV. Now that they can sell directly in Virginia, they can handle registration and sales tax themselves, which saves a decent amount of hassle.

Finally, it can affect the post-sales experience in extreme cases. For example, New Mexico is so strict about this stuff that they won't even let Tesla open a service center. You can buy one there, but you'll have to go extremely out of your way to get it serviced.


Well, yes, but some states are really freaking big and it's not like New Mexico or Oklahoma are going to be able to support a Tesla dealership. It's a true enthusiast that will drive a car 1000 miles when it only has a 200 mile range.


Tesla's supercharger network makes long-distance travel pretty convenient, as long as your trip is covered by the network. Driving a Tesla for a 1,000 mile trip is no big deal.


As Clark Howard says, it can take a lot of stress out of the equation by negotiating via email. Then they can't make you wait 30 minutes or an hour as they pretend to be talking to their boss, and you can communicate at your convenience.


"Tesla has long borne the brunt of these kinds of state laws, which were ostensibly first put in place to protect consumers..."

Does anybody know the backstory of this customer protection?


Good. We very seriously need this.

My very first time in a dealer was in '88, and I bought a Sprint, the little 3 cylinder car, for something like $5K and change. The total finance amount was 12K! And I was young too.

Oh well, that actually was a great little commuter car, and I got much more than that 12K out of it, but knowing how shitty the dealer was just chapped my ass big. Never did forget it. Won't either.

While the kids were growing up and I was paying the house off, I really didn't see any need for new cars. Just bought reasonable used ones, mostly for cash, and that really saved me a ton. But we eventually ended up wanting an SUV for the dogs, camping, kids, friends.

During the years I was away from the dealers, I moved from a pure tech role to one with a heavy sales / consulting component. Turns out I was ready, and went to battle. The people here saying it's war really aren't kidding. I think the no bullshit fixed price dealers are OK, but that price really isn't all that good of a deal. It's just not painful. Good for them to offer a reasonable offering to the market.

Sadly, I wanted a Ford, which meant going to an older school type dealer. Slimy as hell. For what it's worth, I've put the overall strategy here on Quora: http://www.quora.com/What-are-the-best-bargaining-techniques... Lots of good tips on that question overall too. Online, etc... I think the share means you can read all the question answers for that shared question.

It's an ugly process, and it took me about 8 hours to buy that car. I had to do things like when they left me, I would leave too, going to the other end of the lot after getting my free coffee, and just staying there waiting for them to trudge out there, only to walk all the way back, and do it again. It's actually funny in hindsight, but maddening at the time.

Or, I would end up in ego contests: "Are you man enough to buy this car?", to which I actually said, "Only if you aren't such a bitch I would be embarrassed to admit buying from..." good god. But that worked. Got the manager with the brass rings and went to town on the deal proper. Nothing reasonable was going to happen as long as I was dealing with the front end bruiser. Sad.

The Expedition I wanted was MSRP at something like $42K? Maybe $40. I got it for $31,500 and that's one hell of a lot of margin. My guess on the invoice on it was in the high 20's, btw and I got them to show it to me after about 4 hours. But the pain was not over!

The owner of this dealership had a very hot daughter doing contracts. She wrote one up, leaned into me hard and said, "since I know you so well already, how does this one look?" Also funny looking back, but maddening at the time! I had to cross out lots of ugly numbers, and that was because they had packed all that money back into the contract! Worse, had I not been dealing on the front end, some people probably get the ugly treatment on both, paying way too much for the car too.

Since then, I've helped a few people get cars. I ask for a percentage of what I get out of the price of car. I've gotten $1K pretty easy, with people actually wanting to pay me more, which seems to me a great indicator of just how painful dealer purchases really are.

Tesla isn't interested in any of this. They want to make a great car, ask an appropriate amount for it, and sell it to people who see the value. Nothing at all wrong with that, and if these dealer clowns had any soul at all, they would be working double overtime to build trust rather than abuse it at every turn.

There isn't anything in this process I find redeeming. Go TESLA! Edit: Actually, that's not true. If one is into the brutal sport of it, doing battle with a dealer to score a sweet price on a car they worked way too hard to sell can be gratifying, but this really isn't high value for the vast majority of people.

I'm not really a vindictive sort of person, but man! Many dealers have something ugly coming their way, and I hope they get it big. To the few out there doing a fine job of it, I'm sorry. The company they keep must be absolutely terrible.


Interesting take away: " a unique new category of vehicle dubbed “autocycles.” "

And this $6800 tron like gas powered tricycle with 84mpg - https://www.eliomotors.com/


I wish it wasn't vaporware. :(

I wish the best for them, but that 84mpg is an estimate for an engine that hasn't been built yet and might be outdated by the time it gets produced. (If it ever does.)


Neat. I notice 2 of 4 pictures show inclement weather, which is probably to show their advantage over motorcycles. Since in general a 2-wheeled motorcycle is more enjoyable than a trike.

Can this thing provide the crash protection of a normal car? If not, why not get a normal MC?


"Each Elio comes equipped with a Safety Management System that includes three airbags – a reinforced roll-cage frame, Anti-Lock Braking System, and 50% larger crush zones than similar vehicles. "


The main reason people build 3-wheeled cars is that they don't have to provide the crash protection of a normal car.


Cool concept, but man the background image of it driving that 3 wheeler on a rainy road covered in wet leaves looks like it'd be a scary experience.


Is it just me or does anyone else feel that it does not look cool


This 1000 times. Dealers are unnecessary middlemen and provide no value added service. They are a protected cartel and serve to disenfranchise regular, every-day car buyers. My last vehicle was purchased using TrueCar (truecar.com) and I highly recommend using this service to make sure you are getting a fair price if you unfortunately have to work with dealers. Hopefully more and more Teslas will be available soon!! I'd buy one on principle alone.


Dealerships are middlemen who CAN but not always have a place. If for instance you had trouble getting financed a middleman could facilitate the process of buying a car.

If you didnt know exactly what you wanted in a vehicle again, a middleman would be helpful.

If you know what you want and just want to buy the damn thing, you dont need a middle man.


Has anyone done the math on if Tesla will be able to meet future demand without sending supply to 'dealerships' (or other lots?)? I'd imagine a large portion of a dealership's cost is in inventory/inventory management. (could be wrong though...)


They're built on-demand is there's very little inventory sitting around. Typically the service center here in Portland only has 10-15 on site for delivery.

At the pace they make changes to the car it really doesn't make sense for them to manufacture large batches and those not interested in waiting can pick up an inventory/CPO.


Not sure it's possible to maintain at production targets. 2014 if I recall, Tesla did ~35k units. That's ~12 cars/ hr if we assume 12 hour work days.

Their 2016 target is 100,000 cars or 33 cars per hour by 2016. So for example they'd have to both double their plant capacity then get 50% better at making cars. Seems like a tall order but perhaps doable for a guy like Musk :)


'Up to May 2010, NUMMI [now the Tesla plant] built an average of 6000 vehicles a week' http://en.wikipedia.org/wiki/NUMMI


From what I've been told, the plant they make them at is only fractionally used. I would assume that means there is plenty of room for production line growth if they need to do that.


Between Model S demand, Model X demand, and PowerWall oversubscription (the next two years already sold), I don't believe they'll need to consider dealerships for quite a bit.


Could this be perhaps as big of a contribution to the auto market for consumers as actually having an electric car? What if Tesla makes the dealership model obsolete. That would be an incredible side effect.


I back the right of any manufacturer to sell direct to consumers. Go Tesla!




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