Why are cars only sold through dealers?

Long-established state franchise laws that largely prohibit direct sales by auto manufacturers are the biggest reasons dealers are mostly impervious to outside threats. The idea behind the franchise system is that third-party businesses can service customers better by fostering competition.

Do car companies sell to dealerships?

In a nutshell, automakers produce vehicles; dealers sell them to the public, in every case except Tesla, which builds cars and sells them direct to customers, but this is the lone rare exception. Car dealers are privately owned in most cases. The automaker doesn’t own any part of your local car dealer, and vice versa.

Is it better to buy from dealer or manufacturer?

In most states, the only entity that can sell you a new car is a licensed new-car dealer. So you have to buy from a dealer even if you order the car “from the factory.” Since the dealership has no investment in that to-be-built car, it might be less likely to discount the price.

Why do companies have dealers?

A distributor becomes the sales arm of your company for which you do not have to pay. By using distribution, you are able to reach a mass audience of retail outlets without having to invest any of your own company money into developing and maintaining that business network.

Why can’t car companies sell directly to consumers?

The reason is that there are several laws that flat-out ban direct sales to consumers. Not only that, but it’s also illegal for any manufacturer to open up their own dealership. All dealerships have to be completely private and unrelated to the car’s manufacturer.

What is the benefit of dealership?

The benefits of being a dealership or a distributor are many. A franchise is normally able to secure a lower price on goods, giving them greater buying power, than an independent seller would be able to get.

Why is it important to have distributors?

Distributors play a vital role in keeping the lines between manufacturers and users operating smoothly. They can expedite response times, enhance a company’s reach and even create value-added packages.

Why don’t car dealerships sell directly to customers?

Long-established state franchise laws that largely prohibit direct sales by auto manufacturers are the biggest reasons dealers are mostly impervious to outside threats. The idea behind the franchise ­system is that third-party businesses can service customers better by fostering competition.

Why do car dealers want you to finance through them?

Car dealers want you to finance through them because they often have the opportunity to make a profit by increasing the annual percentage rate (APR) on customers’ auto loans. But they also have relationships with multiple lenders and car manufacturers.

Would you buy a car online or from a dealer?

While more than a third of customers say they would consider buying a car directly online, according to a study by McKinsey & Company, most want to try before they buy. More than 80 percent of buyers take test drives, underscoring the continued strategic importance of dealers.

Can car manufacturers sell their cars through retail stores?

“Most state laws expressly prohibit manufacturers and distributors from operating retail outlets,” said Carl Compton, Executive Director at OMVIC, the auto sales industry regulator in Ontario. “They must by law sell their vehicles through independent franchise retail distribution network.”