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More Big Car Dealers Likely

by Staff
October 30, 2003
2 min to read


Would consumers prefer to shop for cars the way they shop for small kitchen appliances at mega-retailers such as Wal-Mart? J.D. Power III

thinks so -- and he believes the shift will happen in 10 to 15 years as restrictive state franchise laws are overhauled, according to the Detroit News.

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Auto dealers sharply disagree, however, saying the franchise system works and is here to stay, the News said.


In a commentary published Oct. 28 in the Wall Street Journal, Power argued that car and truck buyers would save money if a wide array

of vehicle makes were sold in a single store. He said the existing franchise system, which among other things bars dealers from freely mixing different brands in one retail space, inflates the cost of a vehicle by about 30 percent.


Power's comments drew a sharp reponse Oct. 29 from the National Automobile Dealers Association (NADA), which refuted Power's statistics -- notably the 30 percent markup -- and his conclusions, according to the News.


"The most recent study found that the estimated cost to consumers of franchise laws on a nationwide basis is 1.7 percent" of the vehicle's cost, NADA Chairman Alan Starling said in a prepared statement. "That's a small price to pay to support a dealer network that competes daily for product, price and service at conveniently located dealerships in every community."

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Starling said most car buyers are not dissatisfied -- and those who are usually grouse about defects or problems with the vehicle.


Chris Denove, a partner at J.D. Power, said Oct. 29 that Power was trying to open a debate about new ways to sell cars that might boost customer satisfaction. "He's endorsing greater freedom for dealers," Denove said, according to the News.


According to Consumer Reports magazine's polls of subscribers who have bought cars, two-thirds are satisfied with their dealers, and one-quarter are very satisfied. Only 2 percent are very dissatisfied, said David Champion, Consumer Reports' director of auto

testing.

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