Buying a car from a dealership can be difficult, especially if you make one of these common new car buying mistakes. Although Americans spend more than $1 trillion annually online, nearly all new car purchases in the country are made in person at a dealership. Franchise laws in every state give dealers the right to sell cars through dealerships and often ban direct sales. Competition is still encouraged between franchisees, which is why you might see multiple independent dealerships for a brand in the same
locality.
In the earliest days of the auto industry, customers could buy automobiles directly from manufacturers. This made financing and servicing new vehicles needlessly difficult for consumers, and forced automakers to absorb additional costs. As the automobile industry matured throughout the 20th century, these shortcomings gave rise to a franchise system where each manufacturer sold or leased the right to sell its cars to local business owners. Automakers no longer had to bear the cost of hiring sales staff and maintaining showrooms, and dealers earned a markup on each new vehicle sold plus income generated from performing manufacturer-endorsed maintenance and repair. The typical arrangement had dealers paying half the cost of each car up front and half upon delivery, which provided car companies with a steady stream of revenue.
Manufacturers had most of the control as the franchise system developed, retaining the right to add more dealers to any given area at will.This put pressure on many dealerships to cut prices to barely-profitable levels, but over time the dealers banded together into groups like the National Auto Dealer's Association (NADA). Through decades of lobbying and campaign contributions, these groups were able to influence legistatures to pass laws that protect car dealers. As for Tesla, the company accounts for about two of every five EVs sold in the U.S., thanks in part to its direct sales model that eliminates dealerships altogether.
Read more: 5 Of The Worst Car Trends We've Ever Seen
How Tesla Is Circumventing US Law
Tesla has never had any franchised dealerships; since it hit the market in 2013, Tesla has showcased its cars at temporary locations like shopping malls and directed customers to its website to make purchases. One of the things you should know before buying a Tesla is that you can't buy one in all 50 states because of laws that ban direct sales by brands that have never had franchised dealers; it's why Tesla can't open dealerships in Wisconsin.
In the meantime, Tesla is employing unconventional strategies to keep its numbers healthy. The company leases vehicles in some places where sales are not allowed, allows buyers to make online transactions across state borders, and has set up stores on Native American tribal lands where state laws don't apply. There are plenty of lawsuits on the matter working their way through the courts, including a years-old battle over Louisiana's policies that was just settled by Tesla. That case has already been heard by a New Orleans federal court and separate appeals court, and may be on the Supreme Court's docket soon.
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