Monday, May 27, 2013

What A Weekend

Most of Saturday and Sunday was spent providing close combat support to my son while he was out car shopping.  Once this experience is complete, I am sorely tempted to write an article with the title, "How Car Sales Gives Free Market Capitalism a Black Eye."

2 comments:

SJ said...

The car business in general isn't exactly a bonanza of free-market actors unbound by contract/law/policy.

There are City Zoning permissions, State licensure to be in the business of selling cars, paperwork surrounding the task of properly transferring titles to vehicles, regulations on the business of running the any repair-shop associated with the dealership, with further regulations for handling toxic chemicals (battery acid, antifreeze, engine oil).

And the dealer is interested in being a local monopoly for whatever brand is offered. The OEM is interested in the same thing, as a local monopoly means that dealers won't be undercutting each other too much on sales price.

Then there's the relationship between dealer and sales staff. Sales staff usually work on commission.

And sales staff on commission have a set of incentives which align with taking advantage of less-knowledgeable customers.

Not to say that this is a good business model, but the reasons for it being bad are partly that it isn't an unfettered free-market...

(Did I mention that if the dealership also has an in-house credit agency for issuing loans on the cars, that the dealership can afford to sell the car at a loss and make up the loss through the interest on the loan?

But running a credit-agency on-site has another layer of regulation on it, and many dealers can get on-site reps from the OEM's credit-agency. Which offers kick-backs to dealers for convincing car-buyers to take out loans...)

Rob Crawford said...

I have a deep loathing for appliance salesmen after having them ignore me, in favor of my parents, while I was shopping to equip my new home. I was about 25 at the time, my parents were on the edge of retirement -- so the salesmen assumed they were the ones with the money.