Publicly Owned Mega Dealerships

hpmctorque

Warren Buffett is getting into the car business.

Last week Buffett's Berkshire Hathaway announced that it is buying the Van Tuyl Group, the fifth largest auto dealership group in the U.S. Van Tuyl It has 78 dealerships.

Buffett said "this is just the beginning for Berkshire Hathaway Automotive," hinting at future acquisitions in the highly fragmented auto-dealership business.

What are your thoughts on the consolidation trend of auto dealerships? The two largest are AutoNation and Penske Automotive Group. Do you think they offer better values and more choices, or do you prefer personally knowing the owner of the dealer from which you buy your cars, and of the owner knowing you? Do you have a relationship with a particular sales person?

What's gained and what's lost, in terms of the customer experience, with the trend to publicly owned dealerships?

stever

Mandatory pinstriping? More fees? Higher prices? That's what happened with the two "captive" Toyota distributorships.

Mr_Shiftright

About what you'd expect. As this dealership group comes under the umbrella of an investment firm, it will be under increasingly pressure to please its investors (be they private or public).

isellhondas

I'll just bet they band together and stop the practice of cheap selling cars just to make a deal happen. When a shopper tries to pit dealers against each other it's not going to work very well.

In my area we have four stores that sell the same luxury brans and they do NOT cheap sell cars. They have a certain floor which is close to MSRP and they won't budge below that.

If the shopper doesn't like this, they can buy a different brand.

This could just work. Buffett is a very smart man.

Offer enough money to a local owner and you'll own a store!

fintail

What sells near MSRP these days? The local Bentley-Lambo dealer?

Mr_Shiftright

Well if the idea is to price-fix within the conglomerate the Internet is going to kill them. This is 2014, not 1994.

isellhondas

How will the internet kill them if the same mega owner controls all of the stores within a three state area? Refusing to give cars away isn't price fixing!

Michaell

isellhondas said:

How will the internet kill them if the same mega owner controls all of the stores within a three state area? Refusing to give cars away isn't price fixing!

Customers will buy from the fourth state over ... or work with a different dealer selling the same brand.

Now, if you're suggesting that AutoNation, Sonic and BH Auto collude to fix prices in a certain market, the government might have something to say about that.

stever

More fodder for letting the manufacturers sell direct too.

Mr_Shiftright

In a tight economy, some dealer is always going to jump ship and sell cheaper...."half the loaf is better than none at all". Americans will drive 100 miles for a taco---you think they won't drive that for $500 off on a new car? I bet they will.

fintail

Which local lux brands sell at or near MSRP? It aint BMW or MB, I know that much. Are Lexus devotees still that fanatical?

stever

The Macan's TMV is MSRP, but it's new. The Cayenne is "discounted", if you consider $1,000 off a $71k car a discount.

The Jag F-Type R is going for a couple hundred over MSRP currently. Another newbie.

Michaell

Mr_Shiftright said:

In a tight economy, some dealer is always going to jump ship and sell cheaper...."half the loaf is better than none at all". Americans will drive 100 miles for a taco---you think they won't drive that for $500 off on a new car? I bet they will.

Exactly.

And, from a cost standpoint, that 100 miles is what, 3 hours round trip? $167/hr is a pretty good savings for a bit of time on the road.

isellhondas

I'm not suggesting that any stores are price fixing. Not at all.

I am suggesting that the owners may be putting their foot down and telling their managers not to sell a car unless a decent profit is being made. That isn't illegal.

As far as travelling long distances to make a deal, yes, that will certainly happen in a lot of cases. Other times people will pay more for the convenience of dealing with a local store if the difference isn't excessive.

Back in the "old days" some small town stores were reluctant to do any warranty work for cars that had been bought from far away mega stores.

Michaell

isellhondas said:

I am suggesting that the owners may be putting their foot down and telling their managers not to sell a car unless a decent profit is being made. That isn't illegal.

Agreed. So you're saying that the dealer principal will hold the line with the management team to establish a higher "floor" beneath which they won't make a deal?

So if the managers get to the end of the month and need 3 sales to hit a major incentive, they won't dip beneath that pre-defined minimum amount to close those deals?

Not sure I see that happening.

kyfdx

Mr_Shiftright said:

In a tight economy, some dealer is always going to jump ship and sell cheaper...."half the loaf is better than none at all". Americans will drive 100 miles for a taco---you think they won't drive that for $500 off on a new car? I bet they will.

I have to say.. 18 miles is about my limit for a taco... and, then it better be sensational.

fintail

Which is it that sells close to MSRP? I'm curious.

I suppose it could be Porsche as a brand, but not as a dealer group - and I think there's only 4 dealers in the state anyway.

isellhondas said:

I'm not suggesting that any stores are price fixing. Not at all.