New Report: Consumers Benefit from a Franchised Auto Dealer Network

MCLEAN, Va., June 17, 2014 /PRNewswire-USNewswire/ -- America's franchised new-car dealer network provides numerous benefits to both consumers and auto manufacturers, says auto industry consultant Maryann Keller in a new report released today.

According to the report, "Consumer Benefits of the Dealer Franchise System," factory-direct sales of new cars either sold online or through factory-owned and operated retail outlets have not resulted in lower prices for car buyers or increased market share for manufacturers.

"The franchised dealer network benefits consumers and manufacturers alike by providing fierce price competition among dealers and an extremely efficient distribution network that is acutely sensitive to local markets," said Keller, in the 34-page report prepared for the National Automobile Dealers Association. "The new-car dealer franchise network is the most efficient way to distribute and sell new cars as well as provide convenient access to service over the life of every vehicle."

Keller, managing partner at Maryann Keller & Associates LLC, said, "past experiments by factories, such as Ford Motor Co. and General Motors, to sell directly have proven unsuccessful, and the results have only reinforced the need and value of having a network of franchised new-car dealerships."

The report also excoriated critics who call new-car dealers 'costly middlemen' – demonstrating that as long as cars are retailed, there will inevitably be costs of retailing, and that local competitive dealers are the best way to lower those costs. "Proponents of a factory-direct system have also failed to identify the system-wide savings for car buyers if manufacturers were to provide the same services that dealers do to satisfy the needs of each customer," she said.

Keller added that local new-car dealerships make a very complex process as simple as possible—from stocking ready-for-sale inventory, offering test drives, appraising trades, arranging financing, interacting with the DMV to replace lost titles on trade-ins, registering cars and obtaining license plates, calculating and paying sales taxes, and managing and retaining all documents from each transaction.

When it comes to service and repair work, Keller says advocates of a factory-owned retail system wrongly assume that manufacturers would be as objective as an independent dealer in addressing all customer complaints.

"The personal relationship with a local business has tremendous value that cannot be replaced by an 800 number or a call center," she said. "The dealer acts as an advocate with the factory for the car owner, especially for warranty and recall claims."

Keller's report is part of a major new "Get The Facts" initiative from NADA to promote the benefits of America's franchised new-car dealership network. The initiative includes a Web site and variety of multimedia resources available at www.nada.org/GetTheFacts.

The centerpiece of the project is a two and a half minute animated video detailing the benefits of the dealer franchise system, viewable here. Other resources include a 30-second video, a fact sheet on the consumer benefits of dealers, a longer informative FAQ, a document explaining the reasons for state franchise laws, an infographic and other materials.

There are 17,700 new-car dealerships with nearly 32,000 domestic and international franchises that employ more than 1 million people in the U.S.

Click here for the full Keller report.

SOURCE National Automobile Dealers Association