And even more interesting is that family usually owns multiple brand dealerships sometimes to the point of almost a monopoly in the local market.

They also tend to be very involved in local politics. Seems to me they fit the definition of "oligarchs": https://en.wikipedia.org/wiki/Business_oligarch

Cars are likely a family’s largest purchase behind real estate. If you are going to sell anything, then sell the most expensive item that EVERYONE buys.

Okay, I'll bite. How do I open a dealership?

First step, have several million dollars available to you. Usually in the region of $10M (which was the estimate for the NBA player Damian Lillard's Toyota dealership, by the time you find a property, build it out, initial inventory stock, etc., etc.)

Dunno, but I can tell you how my family started as I think it's really interesting.

Yugoslavia was just falling apart - the entire country went from planned limited production to open market. My family was importing cars from other countries as this started. The demand was so great, that when the truck with cars stopped on a parking lot at his home, people would come running putting their "reserved" stickers on cars. Everyday he did a trip out of the country and back. "Sold" all cars before he had a chance to step outside a truck.

This lasted for sometime, giving him enough bankroll to open car dealership. Not sure how exactly it happened, but few years later it became Ford dealership and still is.

What does that have to do with anything?

It's a sign of successful rent-seeking.

Owning a car sales franchise is one of the best forms of rent-seeking, thanks to state and federal laws protecting car dealers.

https://en.wikipedia.org/wiki/Rent-seeking

maybe the amount of profit made in being a middle-man between the manufacturer and consumer end-user is unreasonable and unwarranted?

It's only unreasonable if they are not providing value. Lots of us get into business exactly because we can provide value and simultaneously become wealthy. This is no sin.

If they provided value then states wouldn't have needed to enshrine their existence into law. I say let them compete with the manufacturer and see if "go to a showroom for a test drive, then click click click, buy, deliver to your home" wins Vs. "Spend an entire day haggling and avoiding all kinds of poor treatment/predatory practices."

People HATE dealerships. They make a very fun purchase a very unfun purchase.

People hate dealers, love getting a car today. Dealers do what they do because it works, and it is largely what the consumer seems to prefer. You don't think dealers would do online fixed-price sales for pre-orders if it worked? They would! And they will, if the market rewards that.

Very few people actually want to wait weeks or months for the car. HN doesn't believe that, because we're tilted towards Tesla fans who are inclined to be okay with this. Average Joe will put up with a few hours at the dealer to get their new ride today.

"Dealers do what they do because it works, and it is largely what the consumer seems to prefer."

Not likely due to consumer preference, as its a given that dealership and buying experience is often hated by the consumer. look at this thread, talk to friends,and search the internet. Sure its anecdotal but its appears to be pretty consistent across the board despite not being a scientific survey.

Heck even carmax created their business model around how the consumer hates the buying process and even though carmax often charges more in the $2.5K - $4K range than what you can negotiate elsewhere they are still around.

Its more that they (the dealership) has a very strong lobbying influence and have rigged the market in their favor where the consumer has to take it. Like making themselves a forced middleman.

kind of how comcast is often rated among its own customer at the top of the most hated company list year after year ,yet they stay in business.

Something can provide value and still be considered unreasonable profiteering.

Health care in the US comes to mind. Is it beneficial? Yes. Are the prices marked up beyond insanity through bad incentives and rent-seeking? Also, yes.

It's not an either or.

Maybe instead of auto manufacturers getting all the profit it’s nice that a local middleman gets rich too?

But it sounds like the local middleman is getting rich at the expense of fellow-locals

There is little reason to think moving to direct sales will help anyone local, is there?

I'm now convinced it is a bad idea. But I don't see it being good for local at all.

The manufacturer can set the invoice price at whatever they want already. Dealerships are only negotiating their piece of the pie, they aren't actually able to alter the core price of the vehicle. The market/competition determines what a manufacturer charges, the dealerships just obfuscate the exact figure.

So I agree with the other commentor, they exist to extract local money, to make a few locals rich, the manufacturer's piece of the pie is whatever they think they can charge either way. If you cut out dealerships you make prices less obscure and force manufacturers to compete more closely with one another, and also save the middleman rent-seeking.

Sales margins are low. Service is the big money maker, and if you buy a new car you don’t want to void the warranty.

Making money on the back through financing or upsells is normal.

Sorta. Most of the big names already make more with financing than they do from the car.

Cars are odd. Shipping is not cheap on them. And will never be cheap. If there is not some contractual obligation to ship inventory closer to consumers, I see little reason to think prices won't go up in a market that is dominated by direct sales.

Well, we've recently seen dealers marking up cars insane prices, so maybe direct sales at MSRP do help keep money local.

I'm glad if I'm going to pay someone for not doing anything it's a local person so I can see how much my money is helping them at the country club I can't get into.

Perhaps you can gaze wistfully at their yacht you can't hope to afford in the local marina you can't afford moorage at too!

Fun times for all.

I mean, I'm not really trying to defend them. Just saying that having the wealth local gives a better chance of taxing it locally.

I'm game for how this week help local folks, though. My gut is it will just be fewer rich people at the very top of these companies.

The world needs fewer middlemen

Not necessarily true at all.