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News & Updates

News Release: Healthy Dealership Competition Benefits the Automotive Consumer
May 22, 2014

News Release: Healthy Dealership Competition Benefits the Automotive Consumer





Sara Panza
Greater Cleveland Automobile Dealers’ Association


Healthy Dealership Competition
Benefits the Automotive Consumer


Cleveland, OH (May 22, 2014) – With the internet and many companies turning to direct-to-retail models today, there are some people who might question the current auto dealer distribution business model. But are consumers truly better off buying directly from the factory or off the internet?


The answer is no.


Healthy competition makes the automotive dealership business model work, not just nationwide, but especially in Northeast Ohio.


“Dealers compete with one another to the consumer’s benefit,” says Louis A. Vitantonio, president of the Greater Cleveland Automobile Dealers’ Association (GCADA), which represents more than 250 dealers in the 21 counties across Northern Ohio. “Having multiple dealers of the same brand in the same market creates price competition and superior customer service as they compete for your business.


“If an automaker operated all of its retail stores in an area, it would have a monopoly of the brand and would be able to set non-negotiable pricing.”


Today, the manufacturer’s suggested retail price is readily available. A consumer can readily find invoice and independent pricing information online. Armed with this information, consumers can go into a dealership and negotiate on price.


However, there are some car shoppers who don’t like the idea of negotiating. Consumers who support factory-direct thinking often like the idea of one low price.


There are already many dealers across Northern Ohio who offer their best possible price to reduce or even eliminate time-consuming negotiation. When they do this, they also factor in their own business costs. They have to or they wouldn’t stay in business.


Often times, they are willing to make a lot less profit on a transaction so they can win a consumer’s repeat business. They also hope a positive experience will help the consumer decide to bring the vehicle back to the dealership for service and maintenance.


In addition, a dealer may have other incentives to move a specific vehicle off of their lot. They may need to move inventory to make room for new vehicles coming in. Or they may want to achieve a certain sales quota on a specific model so they can obtain a greater allotment of newer models coming in the next year.


“These subtle differentiations between dealers work to the consumer’s benefit,” says Vitantonio. “The whole idea of an auto dealer being simply a middleman is a myth. Retailing expenses exist, regardless of the distribution business model you use. In the factory direct model, the cost of showrooms, car lots, sales staff and holding inventory would simply shift from the dealer to the factory.”


And remember, auto manufacturers have stockholders and stakeholders who demand a profit. If they ran retail operations, they would simply average those costs over all of their stores nationwide, add in a healthy profit margin and tack it on to the cost of the vehicle for their best possible price, which would be the same at all their stores.


Consequently, an individual store would have no incentive to work harder for your business in terms of sales. If you don’t like the price at one store, too bad, you’ll get the same deal down the road. In addition, the service department would have no incentive to perform warranty or recall work, which would ultimately cost the parent automaker money. Under the current model, auto dealers are paid by the factory to do warranty and recall work, so they have an incentive to see that it’s done.


Today’s auto dealer acts as an advocate for the consumer, a vital go-between who bridges the gap between the consumer and the manufacturer. Without the auto dealer, many consumers would find it a lot harder to purchase a vehicle or to have them serviced, without significant cost increases. So the current auto manufacturer-dealer distribution works, not only for the automotive business, but the end consumer, too.



About the GCADA  

The Greater Cleveland Automobile Dealers' Association (GCADA) has served the retail-automobile industry and community with integrity and distinction since 1903. Today, located in Brecksville, Ohio, GCADA represents 250 franchised motor vehicle dealers, which includes new-car, truck, motorcycle and RV dealers in a 21-county region of northern Ohio along the Lake Erie shore and beyond.  More information on the GCADA can be found at www.gcada.org.


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