Automakers have sold cars through franchised dealers for more than 100 years. Dealers say this system benefits consumers, but critics contend it is inefficient and adds cost. Here are some key pros and cons cited by advocates and critics:
Pros
Lower price: Competition among dealers lowers vehicles prices for consumers.
Financial services: In addition to selling cars, dealers arrange financing and take trade ins.
Service: Consumers can get their vehicle serviced at the same place they bought it. This can foster a sense of community, trust.
Advocacy: With warranty issues, dealerships often advocate on behalf of consumers with the manufacturer.
Cons
Limited competition: Vehicle manufacturers are required to sell only through franchised dealers, thereby limiting retail competition.
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Deterrant to innovation: State franchise laws inhibit retail innovations, such as internet sales.
Limited choice: Some consumers would prefer to buy directly from the manufacturer and avoid dealers.
Higher costs: Dealerships raise costs by adding another layer to the distribution system.