As Dealers Become Irrelevant, NADA Fights Back: "At Least We're Not Selling Furniture!"

November 4, 2014

What would a world without auto dealerships look like? A generation ago, the question would've seemed absurd, but today, we may be on the way to finding out.

Tesla is upending the traditional auto sales model, showing off its cars in relaxed "galleries" and selling its vehicles online. Survey after survey shows that consumers are doing their research on websites and apps, placing less importance on dealerships.

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The pace of change is being accelerated by shifting public attitudes and expectations. Over the last two decades, we've seen dramatic changes in the way we pay bills, watch movies, and purchase shoes. We want the car-shopping experience to change, too.

There's also an increasingly loud public outcry against franchise laws. Some 76% of consumers said that they'd be happy to take test drives in places other than dealerships, and 79% would buy a car without going through a dealer. Even venerable institutions within the auto industry industry are calling out dealers for shady practices

And what are dealers doing in response to all these changes? What is their advocacy organization, the National Association of Automobile Dealers doing? Some complicated acrobatics, that's what: simultaneously sticking their heads in the sand and digging in their heels.

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Over the summer, NADA launched an awareness campaign to educate the public about the value of dealerships. The "Get the Facts" campaign overview says that:

"The current franchised new-car dealer model has benefited consumers, manufacturers and local communities for nearly a century. It is supported by both dealers and factories as the best and most efficient way to buy, sell, service and finance cars in the marketplace. NADA’s Get the Facts page sets the record straight about the benefits of the franchise system for consumers and local communities all over America." 

Based on our readers' reactions to NADA's first video, though, consumers ain't buying what NADA is selling. And so, NADA has release two more clips -- the latest, embedded above, dropped on Friday.

NADA's most recent video talks about the value of "price competition". That makes it sound as if cars are sold in the same way as books or sweaters or gasoline, with consumers shopping around for the best prices.

What NADA leaves out, of course, is that this process of "competition" on auto prices is rooted in haggling, which you can't generally do when you're comparing prices on books or sweaters or gasoline. And haggling is one thing that buyers hate

NADA goes on to claim that dealers can't be nearly as shady as people think they are, because they're only making a gross margin of six percent per vehicle sold. NADA then points to furniture stores, which operate on margins of 40 percent. (Note to NADA: commission-hungry furniture salespeople are just as big of a turn-off to many of us as commission-hungry auto salespeople.)

NADA also insists that letting automakers sell directly to the public would be bad, because, for example, GM wouldn't compete against itself for your business. What NADA convenient leaves out of this discussion of free market economics is the fact that there are many automakers in the U.S., and while GM wouldn't compete with GM, Toyota, Ford, Honda, and others would.

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