Comments on: What’s with All the Auto Dealers?

By: WaltFrench

WaltFrench — Mon, 05 Jan 2009 00:47:46 +0000

Domestics might actually NEED a denser network of distributors, who, in turn, capture a larger share of the sales price, because of higher warranty expenses?

Another feature: the domestics seem more likely to have dealers in Smalltown, RuralState, whereas the imports, having built their networks more recently, have not emphasized the declining small towns, and instead are concentrated in urban centers.

Such as ours: it’s impossible to go more than a couple minutes before seeing a preponderance of Priuses here in Oakland/Berkeley. Even last Saturday night coming home from SF at 1AM (Drunks’ Rush Hour), at one point, the majority of cars on the road were those PC hybrids.

By: joeblo

joeblo — Sun, 04 Jan 2009 05:51:07 +0000

Car dealerships in many parts of the country are basically just real estate investments.
They are a way to justify a commercial loan on the outskirts of a growing town (ca, tx, co, nv).
They run a low margin business hiring cheap salesmen on commission and may not even offer service (which is quite lucrative) directly, but contract it out to a 3rd party for a % of sales.

All it takes is to pave a lot (improve it :^) and put up a small building and wait for land prices to increase. Then they sell and make bank, or if the land doesn’t increase they default on the commercial loan and break bank.

By: mudpuppy

mudpuppy — Sun, 04 Jan 2009 04:29:17 +0000

GM has been in business sice 1920. Toyota has been selling cars in the US since the 70s. A better comparison would be how many dealer did GM have in the 50s.

By: jonhendry

jonhendry — Sat, 03 Jan 2009 21:25:44 +0000

Don’t think of them as GM dealers. Think of them as attended parking lots for inventory. Gotta put them somewhere, might as well put a sales and support staff with the cars.

By: Mike in Nola

Mike in Nola — Sat, 03 Jan 2009 16:35:38 +0000

One thing no one has explained is that why Toyotas cost more if their workers are paid significantly less. Of course, the reason is price fixing by Toyota. Toyota controls supply tightly and conventional Toyota dealers don’t really compete in a meaningful way.

Around Houston, you can show them the invoice prices and holdbacks from Consumer Reports or Edmunds and they will deny it. It’s pointless trying to deal with them. I had to fly from Houston to DC to get a reasonable deal on Camry at Fitzgerald Auto Mall who advertises prices on the web that have a reasonable markup. Even counting the cost of the trip (minus the fun of driving a new car back through the Blue Ridge) I saved a good bit.

By: Marion Maneker

Marion Maneker — Sat, 03 Jan 2009 15:59:55 +0000

@doherj01

Do we know for a fact that the “cost” of the dealer network is the financing of excess vehicles for excess inventory? This is my main question. And thought it makes a great deal of sense, I’m curious to get some solid information.

By: alexp

alexp — Sat, 03 Jan 2009 15:49:49 +0000

My shallow understanding is that dealer contracts make it extremely difficult for manufacturers, GM mostly, to drop car lines. If you need to pay Hummer dealers $2 billion just to stop making Hummers, it makes your long-term decisions tougher.

By: doherjo1

doherjo1 — Sat, 03 Jan 2009 14:18:13 +0000

It would be interesting to look at the growth in dealerships as of the time when GMAC began financing dealer inventory. I suspect that if GMAC made a lot of money from this, it would create an incentive to create more dealerships.

By: Greg0658

Greg0658 — Sat, 03 Jan 2009 13:43:42 +0000

hey LS you posted that while I was writing …
I wonder if lawyers were banned from holding a political position .. the laws got written in courts argued by lawyers and supervised by judges with the outcome and law decided by jurys with that result recorded by court reporters … became the laws we operate under … would we be better off ?

It would interesting times with jury tampering wouldn’t it.

By: Greg0658

Greg0658 — Sat, 03 Jan 2009 13:28:28 +0000

Match Game 2009
Let see whats a guy to do to make a living to feed himself and family:

a) a product or service that a majority of folks can’t live without
b) a product or service that doesn’t cost more than a $75K outlay to get going (that number depends on locale)

thinking bigger in a progressive locale:
c) product or service that the bankers, chamber, college, city mayors will pump massive dollars into with uncertain return when the established have major advantages (size, spance, price’g power)

thinking smaller in an overpopulated with few job opportunitys locale :
d) product or service that folks can escape situation with

now match these answers to the letters a-d:
baby sitting – sewing – house cleaning – running a cash register – stocking shelves – drugs – prostitution – car jacking – bank robbery – military industrial complex dodad – military industrial complex tank/jet/ship/small arm – green energy dodad – the Oil Energy replacement GREEN Energy – used car dealership – new car dealership – commercial property builder – residential home builder – restraurant – used stuff store – “save the brown bay seals” organization – have a kid and become a ward of the state

thats the short list … game 2 – while watching the tv news match the last job title to the person in the story