How To Fix the Auto Industry: Get Rid of Dealerships

Sometimes ideas are too simple to actually work. If the United States is going to give $34 billion to failing auto industry, I have a right to give my suggestions for how to fix things.

In order to make it for the next 100 years you are going to have to radically innovate. It’s not going to be easy. It’s going to mean thinking about doing business differently than you ever have. To save the US Automakers, it’s going to mean sacrificing some of what has become sacred for the sake of making it work from here on out. Inside out top to bottom changes are what you need.

This is my first idea:

1. Starting immediately, your cars will only be purchased directly through you. No car buyer likes the dealership process so you need to kill fast Eddie’s business. You don’t buy a washing machine or a computer without knowing what the price really is, so why should you expect people to buy cars that way?

2. Make car buying about the customer and not the dealer. This means you need to add a shopping cart, much like the one from Dell or Apple, to your website. For most buyers, getting a new car is either a very rare occurrence or they do it all the time. Make the website intuitive enough for the buyer to decide their buying experience. Instead of putting them on the defensive with a negotiation process that favors the professional, make the process about the buyer. The customer is your friend! Time to treat them that way.

3. Have a simple pricing structure. Allow people to know how much the car costs you to produce. Then add a 5% profit and a 3% delivery free to that. Show the math. Allow customers to drill down into that invoice so they can see where every single part comes from and how much it costs. Not only will your prices be cheaper than the competition, your customers will know that they aren’t getting ripped off. All the shopping cart to add things one by one or by package. People are smart and they know what they like in a car… give them that ability.

4. Eliminate the local finance office. This is the sleaziest part of the car buying experience. Allow people to buy the car through your finance company, or allow them to use a bank transfer, or even credit card to buy the car. Again, this is about giving your customer a fantastic buying experience instead of walking onto a dealer lot, with your brand on it, and getting screwed by someone representing you.

5. Convert the local dealership into a delivery, customization, and repair shop. By getting rid of a sales and finance people will make the dealership more like the Apple Store. Change the name of these from dealerships to delivery locations. Instead of a sales force you will have genius’s and customer service agents.

6. Only allow customers to come to the delivery center to buy accessories and receive customer care. Effective immediately, you will deliver the car where the customer wants it. Want a test drive, you can arrange to meet them somewhere. When it needs service, you’ll pick up the car free of charge.

7. Every part of your cost should become open. This is about trust. You can make your money. Just be open about it. Customers will reward you for it.

8. Allow customers to sell their used cars on your website. Have the local delivery office come to the customers house, create a listing, apply the proceeds to a future sale.

9. No one in the sales, marketing, delivery process will be commissioned. Pay the people at the delivery centers well, but don’t overpay them. You want these people doing this job for love. A lot of people need jobs. If people at the new delivery centers quit… they will be easily replaced.

By Adam McLane

Kristen and Adam live in the San Diego neighborhood of Rolando with their three children.

8 comments

  1. Great thoughts adam.

    I agree that the dealerships are the problem. Especially with pricing. I can build a car online, and drill down the price exactly, but getting that car at a dealership is hard. They always seem to add on their own items, like a “desert protection package”, which thy cant quite explain, or car alarms ontop of the included security.

    I do think most cars regardless of dealer options are clearly priced. The biggest haggle comes to the trade in.

    Personally, I so far in life have twice paid cash for a car (and a truck), no trade in, and it was pretty easy. Both were used, and I simply said what I wanted to pay, based on blue book, and condition of the car. End of story. But then again, thats not the typical american way.

  2. Matt- I think that puts you in the 1%. (Paying cash for a car.) Kristen and I are currently saving to do just that… but it’s HARD!

    I agree with you about the trade-in thing. That’s why I think they should allow you to sell your used car on their website and credit proceeds to a future purchase.

    All I’m really suggesting is that they change the game completely. Look at car production from a fresh set of eyes… inside of Detroit that is impossible.

    I was crazy enough to send these ideas to Washington! Not that they will be acted on, but my US Senator at least read them and responded.

  3. I think these ideas are good and would go a long way in helping the auto industry. But I’m not sure that dealerships are the cause of the problems. My mom is a cars saleswoman so I’ve been on the inside of the car sales for a while and the mark up on vehicles really isn’t that much. It’s the extras that really bring in the cash for the sales people.

    I also learned that you never go with their loans that they get from banks. They always bump it up a half a percent and get that extra in their pocket.

    I think the real problem though lies within 2 things: The greediness of the leadership and the greediness of the unions.

  4. Dj, don’t get me wrong… I don’t think this is the whole fix, it’s just part one. Fix the car buying experience to be something you want to do. Make it about the customer and not the dealer. Right now, car buying is 10000% about the dealer.

    I’ve got more ideas coming.

  5. I know that this was posted a while ago, but hey! I don’t have Internet at my house.

    I wouldn’t miss car dealerships just because I hate the sight of vast parking lots filled with cars which no one needs taking up so much space, and then with those tacky flags and balloons and flyers and commercials…ugh.

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