Posted on 08/01/2006 7:07:58 AM PDT by ZGuy
What if I said you could save $1000-$2500 the next time you buy a car? What if I told you that you didn't have to haggle with a lot lizard in the process? In fact, you could use the Internet to shop around for a new car instead of driving from dealership to dealership, and then buy at your leisure.
Well, you can't. Know why?
What stands between you and these benefits is your state government. According to a panel recently hosted by the Mercatus Center in Arlington, Virginia, the primary reason for these regulations is collusion between "licensed" car dealers and state legislatures who mandate dealer licenses. Such is the case in all fifty states. Legal and economic scholars are trying to figure out how this happened and how to change it, for the sake of both economic freedom and benefit to customers.
Regulatory barriers to buying a car online are a textbook example of "rent-seeking" -- when an interest group hollers, stomps and lobbies the state until politicians cave. Car companies that might offer cars at a lower price -- with a better shopping experience -- are blocked from doing so.
A question from the audience helped me understand how this all could come to pass; it put me inside the mind of a regulator:
"If all of a sudden people are buying cars online, what will happen to people like my mother? Dealerships will go away. She won't know how to buy online and she won't be able to trust the product unless she meets a salesperson."
But if people really demand shopping for cars offline, dealerships have little to fear since they actually provide that service.
What dealers know full well is that entrepreneurs will find all sorts of ways to make the services dealerships offer redundant -- which will benefit you and me. Consider the question of how people will test drive cars in an Internet purchasing environment. We can imagine automakers offering smaller test-drive centers. And we can also imagine delivery and logistics networks for cars so that people can pick up their cars quickly once they buy them -- or have them delivered to their driveways.
What justifies dealership protection? This is what legal and economic scholars are currently looking into. The Supreme Court has held that, under the so-called "dormant" Commerce Clause, a state is prohibited from discriminating against interstate commerce by passing laws that treat in-state businesses more favorably than out-of-state businesses. Such treatment is permitted, however, if a state can convince the Court that the law advances a "legitimate state interest."
John Delacourt, a legal expert on interstate trade issues, explains it as follows:
"Where the businesses receiving disparate treatment are identical but for their geographic location (for example, a Virginia winery and a New York or Michigan winery), this [appeal to 'state interest'] generally is not possible. However, where there are real and demonstrable differences between the two businesses (for example, an automobile manufacturer and an automobile dealer), a discriminatory law may survive a Commerce Clause challenge. Indeed, in the 1978 case of Exxon v. Governor of Maryland, the Supreme Court expressly held that curbing the disproportionate market power of manufacturers vis-à-vis franchised dealers constitutes a legitimate state interest."
So, does the "state interest" argument for protecting middlemen boil down to the fact that smaller players may not be able to compete? OK. But when it comes to the interest of consumers, isn't that the idea?
We just happen to be living in a time when major US auto manufacturers are hamstrung by cannibalistic unions, stiff competition, and federal regulators. Obstacles to direct-to-consumer sales represent another hard hit against an ailing industry. But even if the US auto industry was doing swimmingly, why should states get in between you and your new car to the tune of a couple of thousand dollars?
Such an unnecessary financial burden to consumers, if relieved, could go towards filling our tanks. It may take a courageous state-level politician to make this a voting-day issue if we're ever going to do anything about it. That's because the only thing as stronger than special interests are voters and enlightened leaders -- the latter of which are so often in short supply. But if somebody has the guts to stand up to them, states may be able to do consumers a real service and win political capital at the same time.
Dup of http://www.freerepublic.com/focus/f-bloggers/1675706/posts - please pull
I did and I am
Anyone looking for a great house in Michigan?
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What if I told you that you didn't have to haggle with a lot lizard in the process? In fact, you could use the Internet to shop around for a new car instead of driving from dealership to dealership, and then buy at your leisure. Well, you can't.I'm confused???
And there was one new Car Dealership with numerous 'lots' across the US (exotic cars; Saleens and Bentleys to Jags) that had pricing listed and a phone number to call. One 'office-lot' was close to me and I was thinking of a used Jag.
This seems contrary to the article?!?
Has anyone used http://www.carbargain.com
I've heard some good things about this service and am in the market for a new vehicle.
I would suggest putting your house on the market ASAP...
You'll have to take delivery in Idaho though...
You may be right, but the local market has not gone bad like it has in some places in the country. Home prices here are relatively low. Also, I will be working here for another 1.5 years until I can retire. We are moving into our retirement home on the coast (it should be finished by Nov) We want to be able to move ourselves and while the house is on the market, I will be staying there during the week until Jan 08. I suppose we could put it on the market now, but if it sold quickly, we would have to put our furniture in storage, etc.
I'm not an expert on this subject, but...
It is my understanding that all interstate automobile dealers, and auto brokers, work through dealers licensed in the state of sale.
You might still save money by doing business with them, but not as much as by doing business directly with the manufacturer, or by using a broker who can deal directly with the manufacturer.
Interestingly, most car dealers don't really make much of a profit in the new car sales department, though they have lots of tricks for making as much as they can. The real money though, is in the service. A significant percentage of new car buyers will return the car to that dealer for service, for many years.
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