How Buying a Car Became So Painful

A peek under the hood of the car-buying process

February 2022

Script

This video is part of our Kite & Key Shorts series—easy to understand...but hard to forget.

 

Americans hate dealing with car salesmen.

A 2016 poll found that 87% of consumers dislike the process of buying a new car.i And the average time it takes to buy a car at a dealership is over 3 1/2 hours.ii

Part of the reason your car-buying experience might be miserable? A series of old laws.

In the mid-20th century, many states banned manufacturers from selling cars directly to consumers. They also passed laws to stop rival dealerships from selling the same cars in the same neighborhood.iii

This lack of competition has made customer service worse and driven up the price of cars.

Estimates suggest eliminating these regulations could bring around 2 million more cars to market, and that increasing supply by that much could lower average car prices by an estimated 8%.4 (That’s over $3,500 off the price of an average new car.)v

Making it easier for new dealerships to open could also save money. A 2015 study found that increasing the distance between Honda dealerships by just 30 miles increased the average price of the Honda Accord by $500.vi

If buying a car straight from the manufacturer sounds weird, you should know that several states have created an exception to the rules, allowing Tesla to do direct sales.vii

But in over half of states, direct sales are still prohibited for all other brands.viii

Buying a new car is always going to be a big decision, but does it need to be this complicated?

 

WHAT YOU NEED TO KNOW:

  1. A 2016 poll found that 87% of consumers dislike the process of car buying.
  2. Eliminating dealership restrictions could increase the supply of cars and lower the average car price.
  3. Several states have created an exception that allows Tesla to do direct sales.

Sources

  1. "How Much Longer Will Consumers Keep Buying Cars at Dealerships?" (Bruce Brown)  Digital Trends
  2. Edmunds: How To Shave Hours off Your Next Dealership Visit" (Matt Jones)  AP News
  3. "State Franchise Law Carjacks Auto Buyers" (Jerry Ellig and Jesse Martinez)  Mercatus Center 
  4. "Corporate Welfare: How Automobile Dealership Franchise Regulations Cost Consumers an Additional $48 Billion Annually" (Steve Pociask), p. 9  The American Consumer Institute
  5. "Average New Car Sales Price Now Over $46,000" (Sean Tucker)  Kelley Blue Book
  6. "The Price Effects of Intra-brand Competition in the Automobile Industry: An Econometric Analysis" (T. Randolph Beard, George S. Ford, Lawrence J. Spiwak), p. 1  Phoenix Center for Advanced Legal and Economic Public Policy Studies
  7. “Happy to Shun Showrooms, Millennials Storm the Car Market” (Roy Furchgott)  New York Times
  8. "As EV Startups Enter the Market, They Say Dealerships — And a Decades-old Legal Structure — Stand in Their Way" (Lisa Martine Jackson)  Morning Consult 

Shownotes

SOUND: "The Headhunter” (Hangmen)

FOOTAGE: Halbergman, Jules Frazier Photography (Getty)

CITED SOURCES AND NEWS OUTLETS ARE NOT AFFILIATED WITH AND HAVE NOT ENDORSED OR SPONSORED ANY PORTION OF THIS PRODUCTION.

Sources

  1. Digital Trends
    "How Much Longer Will Consumers Keep Buying Cars at Dealerships?" (Bruce Brown)
  2. AP News
    "Edmunds: How To Shave Hours off Your Next Dealership Visit" (Matt Jones)
  3. Mercatus Center
    "State Franchise Law Carjacks Auto Buyers" (Jerry Ellig and Jesse Martinez) 
  4. The American Consumer Institute 
    "Corporate Welfare: How Automobile Dealership Franchise Regulations Cost Consumers an Additional $48 Billion Annually" (Steve Pociask), p. 9
  5. Kelley Blue Book
    "Average New Car Sales Price Now Over $46,000" (Sean Tucker) 
  6. Phoenix Center for Advanced Legal and Economic Public Policy Studies
    "The Price Effects of Intra-brand Competition in the Automobile Industry: An Econometric Analysis" (T. Randolph Beard, George S. Ford, Lawrence J. Spiwak), p. 1
  7. New York Times
    “Happy to Shun Showrooms, Millennials Storm the Car Market” (Roy Furchgott)
  8. Morning Consult
    "As EV Startups Enter the Market, They Say Dealerships — And a Decades-old Legal Structure — Stand in Their Way" (Lisa Martine Jackson)

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