Pub. 2 Issue 2

Local franchised auto dealers create fierce price competition andpreventmanufacturer monopolies; protect consumer safety with recall, warranty and repair service; generate good-paying local jobs, tax revenues and economic benefits; and simplify the otherwise complex car purchasing and registration process. PRICE COMPETITION Dealers increase competition and drive consumer costs down. CONSUMER SAFETY Dealers ensure safety recalls and warranty work are addressed. Dealers compete fiercely with each other, to the consumer’s benefit. • Having multiple retailers of the same brand in the same market creates price competition and superior customer service as they compete for business. • If an auto manufacturer operated all its retail stores in a region, they would have a monopoly on the brand and would be able to set non-negotiable pricing. Today’s new-car prices are transparent, allowing customers to benchmark pricing and negotiate. • The manufacturer’s suggested retail price (MSRP) is readily available, and consumers can easily obtain invoice and independent pricing information for a vehicle. • Armed with this information, consumers can go to different dealers to negotiate price. • In a factory-direct model, the factory fixes the price of its vehicles without any opportunity for consumers to either benchmark or negotiate prices. “Middleman costs” are a myth. • Retailing expenses exist regardless of the distribution model used. • In a factory-direct model, the costs of showrooms, car lots, sales staff and holding inventory would simply shift from the dealer to the factory. Dealers are more economically aligned with consumers than manufacturers when it comes to safety recalls or warranty work. • Dealers are incentivized to respond quickly to safety concerns, since they are paid by the automaker to perform warranty and recall work. • In contrast, automakers have an economic disincentive to issue recalls or incur warranty expenses, which may imply a mistake, significant expense and/or a lawsuit. • Automakers also have an economic disincentive to follow through even after a recall or warranty action is announced. Franchised dealers create an extra layer of accountability for public safety. • Many states require both the manufacturer and retailers to be responsible for warranty and safety claims, in case a manufacturer goes out of business. • For example: Former Suzuki dealers still service Suzuki cars and trucks even though that manufacturer no longer sells in the United States. • State franchise laws usually require that franchised dealers have service facilities to perform warranty and recall work. Having a dealer advocate on their side makes safety, warranty and service solutions easier for consumers. 1. 2. nada.org/GetTheFacts | CONSUMER BENEFITS OF YOUR LOCAL FRANCHISED AUTO DEALER