Do Away With Dealers?

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Did you know it’s illegal to buy a new car from the manufacturer? That’s right. In most states (48 states) so-called direct-buys are unlawful by statute.

It is a crime to not go through a dealership.

Or rather, it’s a crime for you – if you decided to manufacturer a car – to try to sell it without going through a middleman. The National Automobile Dealers Association (NADA) has seen to it – for all the obvious reasons.

You are also not the first legal owner of your new car.

The dealer is.

He buys the car from, say, Ford – and pays the cost to have it shipped by rail/truck from its final assembly point to his store. This freight cost – plus mark-up – plus other costs (including “prep”) is then folded into the so-called Manufacturer’s Suggest Retail Price (MSRP), which is what you’re expected to pay for the car.

You then wrassle with him over the bottom line price and – eventually – buy the car from him.

Not Ford.

Even if you did a really thorough job researching the MSRP vs. the dealer invoice price (what the dealer supposedly paid Ford – in our example – for the car) it’s highly likely he still made money off you. There are almost always secret factory-to-dealer holdbacks and other incentives which reduce the actual cost of the car to him. And there are numerous opportunities in between that first hello-there handshake and your signature on the contract to pad the bottom line.

The process is purposely designed to be Byzantine.

Which isn’t – as such – evil.

The shuck and jive, the bob and weave – hey, that’s capitalism.

If you have the personality for the ancient rite known as “haggling” – and understand how the game is played – you can sometimes come away from the encounter with a steal of a deal. Or at least, without having been made to squeal. And – yes – dealers can be helpful. It’s sometimes nice to just offload your old car (the trade-in) and drive the new one home. Modern cars are also often pretty elaborate – and having someone explain the features and how things work is a legitimate service. Assuming you need it – and want it.

Not everyone does.

Which brings us to the real issue here: The involuntary nature of the initial transaction – and the fact that you can’t (legally) end-run that initial transaction. You want a new car?

You’ve got to see Mr. Dealer.

We’re assured by NADA that it’s all very benevolent. That dealers provide a critical support network for car buyers so that when they need a warranty claim handled, it can be done locally, etc. All of this is certainly true to some extent. The same extent that it’s true the DMV provides various its “services” to us  . . . services we have to pay for and which, of course, we’re not allowed to say no to.

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