Car Dealers Losing Money on New Cars For First Time Since Great Recession

Perhaps the day of the new car dealership experience is over. This will have folks like Elon Musk ready to cheer. Regulations in the industry have not only prevented people like Musk from selling direct to the consumer. They have also made things more expensive by implementing a middle man. However, for those looking to avoid going through a dealer, lots of red tape exists. In fact, 48 states have laws that limit or ban manufacturers from selling vehicles directly to consumers.

With the way that vehicles are sold today, there has been a paradigm shift in the way that cars are sold. Forbes reports that dealers are seeing a loss, on average, for the first time in a long time. The last time that we saw this kind of trend was during the Great Recession.

Because of the ways that cars are sold these days, dealers will have to shift their focus. Before the spread of the internet, they really had a firm grip on controlling market pricing. However, these days, there is a plethora of competition both in brick and mortar and online.

Perhaps the answer is marking up used cars. However, this has become an incredibly competitive business as well. Therefore, it seems like dealers rely on selling things like service and financing. In addition, some dealers are able to make their money thanks to brand incentives but even these come with a catch. Perhaps the brand behind the dealer will offer a percentage of the sale to dealerships as said incentive. However, dealers need to meet a quota in many cases in order to get an allocation of the more desirable cars. This means buying more of the less desirable cars and pushing them in order to get the good ones.

Only time will tell what is to come of this industry. However, it would appear as if this dated way of selling automobiles is heading straight for an iceberg. Allegedly, the current franchising laws are in place to “protect the customer.”

In 2019, it’s not quite sure how a ridiculous mountain of fees and having to deal with a high-pressure sale is helping anyone. At the end of the day, these regulations feel like nothing more than a way to line someone’s pockets. Perhaps we will begin to see change as the need for a dealership dwindles into oblivion.