Study Quantifies How Much the Dealership Model Costs Customers-And It Ain't Pretty
The Drive • • business
Key Points:
- State laws mandating car sales through franchised dealerships add an estimated $3,934 to $4,992 to new car prices, according to a study by the International Center for Law & Economics (ICLE).
- The additional costs stem from inefficiencies in the franchise model, including inventory carrying costs ($1,045-$1,105), floorplan interest rates (6%-9%), inventory movement expenses ($1,600), and overhead for facilities and staff ($1,200-$1,900).
- Franchise laws were originally designed to protect independent dealers from automaker competition but are now considered outdated and contribute to higher consumer prices.
- The ICLE study suggests that allowing manufacturers to sell cars through alternative models would better reflect modern market realities and potentially reduce costs for consumers.
