Thursday, April 18, 2013

Dealerships - Good or Bad?

Recently Tesla Motors has been in the news because they want to establish factory stores instead of franchised dealerships. This made me think about franchised dealerships and whether they are good or bad. They can be both.

A short time ago I talked, well actually listened, to a youngish man (30s?) talk about his experiences trying to get his new vehicle repaired under warranty. What was worse than the five trips to the dealer to fix what should have been something simple was the dealers seemingly "who gives a shit" attitude. Five visits to the dealer and this guy had a friend diagnose the problem that the dealer should have found on the first visit.

I believe that most dealers are honest and do good work. But a fairly large minority tarnish the rest. Let's face it, when it comes to sales most people would probably rate the experience right up there with having a tooth pulled. About the only thing worse in my mind is going into an appliance store where hordes of sales people descend on you like a swarm of locusts. Very few people come out of buying a car thinking they got a great deal, especially after the closer works you over.

Service departments are seen as only slightly less slimy. There are no more service writers or service advisers, they are service sales people. Their job is to sell you extras not solve your problem. And everyone knows that dealers' service departments are so much more expensive (not always true but that's the perception). Dealers aren't alone in this, almost every auto service place tries to up-sell you regardless of what you came in for.

One of the things that really irks me about service departments is how they set their own maintenance intervals. If your car's service schedule calls for oil changes every 5,000 miles, or spark plugs every 100,000 miles, the dealer may recommend maintenance much sooner, posting their own schedules. And they use high pressure to convince you to use their schedule. My recommendation has always been that if you aren't sure which schedule to follow use the "severe service schedule" in your manual.

I particularly dislike the dealers that try to sell you all kinds of additives or flushes. I used to deal with this on a regular basis during my years with the Bureau of Automotive Repair. Heck I ran into dealers that sold additives and services the manufacturer recommended against. If the service schedule provided by the auto maker doesn't recommend it don't do it.

All of this makes me wonder if the current franchise system really works. One of the biggest problems is that auto companies are loathe to discipline a dealer that sells cars. When I worked for Honda Canada years ago we had one dealer that accounted for something like 90% of the warranty sales of a certain part; it was obvious that they were overselling an expensive yet simple repair. But the sales side of Honda refused to allow discipline. Why? They were the number one selling dealer in Canada.

I'm not sure why franchise laws are so lax for auto dealers. Imagine if one of the many hamburg chains let their franchisees do whatever they wanted. Imagine if the franchisee decided the secret sauce was too pricey and substituted plain mayo. Now imagine that state law prevented the chain from terminating the franchise. That's how it seems to work with auto dealers.

I'll admit I hate buying cars from dealers. I haven't done it very often but when I have I've gone in knowing I'd get screwed. You never know what the real price is of a car, new or used (even with all the price sources available you don't know everything). And I hate the time after you've agreed to buy the car when they try to sell you everything except the kitchen sink. Paint protection, rust protection, how about a service contract, blah, blah, blah.

New car sales have to be confusing to the auto makers too. No two dealers pay exactly the same price for the same car. All kinds of costs and rebates go into what a dealer pays the auto maker and they can change at any time.

Years ago when Saturn first came on the scene they had the "no dicker sticker" and people liked it. Maybe if the auto makers set a firm price with a fair markup - the same price for everyone - people would like it. It might also remove one complaint that many dealers have - when someone goes out of their area to buy a car but expects the local dealer to perform any warranty work.

I don't know if having factory stores would work. I know non-franchise stores seem to work just fine. When you go into Costco or Walmart you don't expect to dicker and you know that generally the prices in California are the same as in New York. But some franchises work just fine. I'm no fan of fast food but you know that the Big Mac you buy in New York will taste just like the Big Mac anywhere else. The price may vary a little but not by much (unless you're in an airport). They may ask you if you want a shake or fries with your Big Mac but they won't send you off to the side to consult with the closer or treat you like you're some degenerate because you don't want fries.

My conclusion is that dealerships are the auto makers' weak links. The few bad ones give all a bad name and they don't change, often because of individual state laws that make it extremely difficult for an auto maker to discipline a dealer. I think the time is right for a change. We don't live in a horse and buggy era anymore so we should have to deal with horse traders.

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