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Comment by ericmcer | Hacker News Reader

I just bought a car and at a certain point during the negotiation I was like... this is weird, subaru is gonna sell thousands of 2020 outbacks, why is there not just a set advertised price.

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This American Life had a great episode called "129 Cars" about the overall dealership phenomenon.

> We spend a month at a Jeep dealership on Long Island as they try to make their monthly sales goal: 129 cars. If they make it, they'll get a huge bonus from the manufacturer, possibly as high as $85,000 — enough to put them in the black for the month. If they don't make it, it'll be the second month in a row. So they pull out all the stops.

https://www.thisamericanlife.org/513/129-cars

In most of the US, car manufacturers cannot sell directly to consumers, and by law must sell through dealers.

Some companies, most notably Tesla, have come under fire in various states for selling directly: https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes

I agree that is how it works presently in the US. Nonetheless, parent's comment is interesting to consider. Why is it that way? Why don't Subaru etc just set a price, you buy the car, and be done with it? The answer is either that it works better or that it's too hard to change. The latter explanation seems facile; with so much money, people and tech involved, it seems likely that the status quo would have already changed to having fixed prices.

Years ago, Saturn dealerships sold new cars at a fixed price. No negotiations. I considered one and rejected it as the price seemed too high. Didn't even talk to a sales rep. The current car sales regime nearly forces me to talk to somebody, and then they can hound me until I buy or they give up.

It might be possible for car manufacturers to motivate sales through some other means, but apparently this way works, no matter how sucky it is.

It really is that car dealerships are very wealthy and have a lot of political clout. There were also early rulings that a manufacturer can't order a car dealership how to operate - the basics of the case were that American manufacturers were lending or outright granting money for people to start dealerships. Those dealerships started trying to sell foreign cars, the manufacturers said "no way", the dealerships fought back, and the dealerships won.

Basically it's become a textbook example of the entrenched parties setting up barriers to entry. They have lots of money, and are often active in their local communities, so people generally like them.

Edit: basically, I'm saying it really is too hard to change because the law is on the dealerships side, and there's a lot of momentum and status quo to overcome.

It's a nice cozy relationship. Many car dealership franchises are basically state-granted hereditary monopolies that print money, so of course they are going to put some of that money back into the community (and local/state politicians pockets) to maintain that. It's good for the politicians because they actually have some leverage over dealers, as opposed to a behemoth like Toyota or Volkswagen.

I don't mean this as a joke, but I thought people generally hated car salesmen?

Here in Japan, the manufacturers do actually set a recommended retail price that is slightly higher that what dealers often sell at. Example using the Subaru Outback mentioned up top, shows three available grades sold starting at 3,410,000yen. Roughly us$30k.

https://members.subaru.jp/estimate_simulation/index.html?car...

They hate car salesmen, yes. But oddly enough "Family Jones Chevrolet/Ford/Toyota/Nissan/etc." has been sponsoring the local little league team for 20 years, so they don't have to do much to convince the locals to tell their state legislators that "protecting" these "family-owned" dealerships is good.

Car prices are the same as any other consumer goods prices: there is a MSRP and, unless it's some rare, high demand model, you can always buy at the MSRP. Unlike other consumer goods, though, it is worth haggling because the retail markup is in range of several thousand dollars and the dealer is interested in your business (maintenance, warranty repairs) enough to forfeit a part or the whole markup. Depending on the incentives, a dealer might be even considering selling under the invoice price. Also there are other components of the deal, not happening often with other goods: trade-in and financing. You cannot put a fixed price on those.

But if you really don't care and want to buy a car for cash at MSRP you can do it with little to no hassle.

Not to mention zero % financing. Watching a poor car salesman try to work his 4 square when his easiest variable is set was amusing.

“How much would you be willing to finance?” “At this rate? 100x the price of the car.”

There is a set advertised price, at CarMax. I always go there. But the negotiation allows more information to pass through the transaction. Is the dealer eager to sell because this car has been sitting on the lot (they overestimated its value)? Is the buyer eager to buy because they hate comparison shopping? This way the comparison shoppers and splurgers both end up paying close to what the car is worth to them, rather than being charged some average price that leads to fewer sales to the shoppers and less profit from the splurgers.

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