Will Dealerships Disappear?

Issue #191

Dealerships are at the crosshairs of…well…everyone. Shady business practices, elevated pricing and automakers bypassing them have all changed the public perception. However, does this mean they will disappear?

Or, you can continue to read by scrolling down.

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Video Of The Week

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In The Know

What’s the point of dealerships?

I’ll be the first to say that I don’t think dealerships as a whole will disappear, although I’ve seen how, progressively, public perception of them has changed radically. We wrote about this situation way back in 2024, and you can read more about it here.

Several factors are changing how we see the dealership. First of all, the first big seismic shift was Amazon venturing into selling cars online and partnering with Ford to sell used cars. Many thought it was the new, cheap way of buying cars. However, it seems to be otherwise.

One thing is clear: this effectively removes the dealership as a middleman in some cases, and it’s only the beginning.

Another big blow came when Rivian won its legal case and is now allowed to sell cars directly to consumers.

So, it begs the question: why is this happening?

To understand it, all we need to do is look at the reasons why companies such as Rivian and Lucid won’t ever use dealerships.

• They don’t want to rely on a middleman.

• They can’t control the customer experience when using a dealership.

• Perhaps, most importantly, they can’t control how much the middleman charges.

This last reason is becoming even more critical. The US requires that automakers sell their vehicles through dealerships in every state.

These state laws were aimed at protecting smaller dealerships by ensuring a steady supply of vehicles.

That’s why the fact that Rivian won its case is so important.  

The problem is that dealerships have evolved to become almost immovable entities in the car-buying process. Recent studies show that direct-to-consumer sales could save buyers up to $5,000.

You can read more about the study here.

A sentiment against dealerships has intensified lately, as some have been found to engage in predatory pricing. This dealership could end up paying $75 million back after being found guilty of shady pricing practices.

However, there is a solid counterpoint dealerships make, and it’s where the argument becomes even more critical. The reality is that a dealership provides consumers with the certainty that they have a place to get their vehicle serviced and have warranties applied, amongst other things.

Are these things worth $5,000 more per car? 

I don’t know, but I’m leaning towards “no.” That’s how we return to the first comment I wrote: I don’t think dealerships will disappear. However, it’s almost inevitable that their financial model will change. Companies are betting on a more direct-to-consumer approach. AI is helping dealerships reduce costs, as this article explains.

My guess is that the answer lies somewhere in the middle. Not every company wants to sell directly, and not every dealership will reduce its costs.

What are your thoughts?