Dealerships are Getting What They Deserve

Summary

This video script delves into the frustrations many people feel with car dealerships, highlighting the inflated prices, unnecessary add-ons, and hidden fees. It discusses the long-standing practices of dealerships adding unnecessary costs like nitrogen-filled tires and overpriced warranties, and the predatory financing tactics that take advantage of buyers. The script also touches on the overstock of vehicles, rising interest rates, and the evolving car market, suggesting that manufacturers and dealerships should offer both direct sales and dealership options. It emphasizes the importance of becoming a savvy buyer to avoid falling victim to these practices.

Takeaways

• 😀 Dealerships are struggling with excessive inventory that they can't sell, resulting in overpriced vehicles on the lot.
• 😀 Even with manufacturer discounts and dealer rebates, the price reduction isn't enough to entice buyers.
• 😀 Consumers are demanding larger discounts, particularly on expensive vehicles like pickups, which are now seen as unaffordable.
• 😀 Dealerships have been criticized for adding unnecessary costs, like nitrogen-filled tires and other add-ons, which provide little to no value to buyers.
• 😀 Financing through a dealership can lead to inflated interest rates, with dealerships profiting from the difference between the approved rate and the rate shown to the consumer.
• 😀 Warranties and other products sold in the finance department are often grossly overpriced, with dealers claiming they're offered at 'cost' when they're not.
• 😀 As car prices rise, many consumers are opting for longer loan terms (84 months), and it's anticipated that terms of 96 months may become more common in the future.
• 😀 The high cost of vehicles and the increasing loan terms result in more interest payments, making it a financially challenging situation for many buyers.
• 😀 Dealerships are now facing a situation where they can't add excessive costs to the loan due to high loan-to-value ratios, impacting their profitability.
• 😀 There’s a growing sentiment that both direct-to-manufacturer car sales and traditional dealerships could coexist, offering more choice for consumers.
• 😀 Consumers are becoming more informed and savvy, learning to negotiate better deals, avoid unnecessary products, and resist pressure from dealership finance managers.

Q & A

Why are dealerships struggling with selling vehicles currently?

Dealerships are struggling due to high vehicle prices, increased interest rates, and a growing consumer resistance to paying for overpriced vehicles. Many cars, including 2023 and 2024 models, remain unsold on lots, and dealerships are offering discounts that are still insufficient to move inventory.

What is meant by 'overpriced inventory' at dealerships?

'Overpriced inventory' refers to vehicles that are being sold at inflated prices, which are difficult for consumers to afford. Even with discounts and rebates, the prices are still too high for many buyers to justify purchasing them.

What are some examples of unnecessary add-ons that dealerships include in vehicle sales?

Examples of unnecessary add-ons include nitrogen-filled tires, extended warranties, and other additional products that provide minimal to no value to the buyer. These add-ons are often sold at a high markup.

How do dealerships profit from financing and interest rates?

Dealerships often raise the interest rate offered by the lender above the rate they were approved for, allowing them to profit from the difference. This is an additional way for dealerships to make money off the financing process.

What is the issue with financing vehicles for extended periods, such as 84 months or more?

Financing vehicles for longer periods, such as 84 months or more, increases the total interest paid on the loan. As vehicle prices rise, people are forced to take out longer loans, which results in more interest over time, making the purchase more expensive overall.

How has the relationship between dealerships and consumers changed in recent years?

Consumers are becoming more informed and less willing to accept high prices and unnecessary add-ons. Many are now learning how to negotiate better and avoid being taken advantage of by dealership sales tactics.

Why do dealerships add aftermarket features like lift kits, wheels, and tires to vehicles?

Dealerships add aftermarket features like lift kits, wheels, and tires to increase the vehicle's price, often by as much as $20,000 or more. They do this because these add-ons can make a vehicle seem more attractive, but they are often overpriced compared to the value they provide.

What is the 'direct-to-consumer' sales model proposed in the video?

The 'direct-to-consumer' sales model involves purchasing vehicles directly from the manufacturer, bypassing the dealership altogether. This model would allow consumers to avoid negotiating and purchasing unnecessary add-ons while still getting a vehicle.

Why do some states restrict direct-to-consumer car sales?

Many states have laws in place that prevent direct-to-consumer car sales, which are often in place to protect the dealership business model. These laws prevent manufacturers from selling cars directly to consumers, forcing them to go through a dealership.

What is the impact of high inventory on dealerships and manufacturers?

High inventory is causing dealerships to lower their profit margins due to unsold vehicles sitting on lots. Manufacturers are also impacted, as they are unable to allocate new vehicles to dealerships with excessive stock, further disrupting the sales process.