Pub. 13 2014-2015 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 25 new jersey auto retailer W W W . N J C A R . O R G AUTOMOTIVE TAX SPECIALISTS Let our 25 + years of TAX experience guide you and your Automotive Dealership. Call today & mention this ad for a free consultation. (973)790-8800 Alan E. Ginsberg, CPA Sal DiBello, CPA aginsberg@brunodibello.com www.brunodibello.com 2000 to produce the subcompact Chevrolet Celta, and announced it would build them to order and encourage online shopping with lower prices than those available through their dealers. Belief that the Internetwoulddisrupt brickandmortar businesseswas never stronger, so no one doubted GMwhen it simultaneously claimed it would sell Saturn cars online in the U.S. the following year. Unfortunately forGM, the experiment was canceled in 2006 because of the high costs of facilitating online transactions and operating distributioncenters.Yet themyth livedon. EconomistGeraldBodisch lauded the Celta program in a 2009 report critical of state franchise laws which ban factory-direct sales of new vehicles, and many have cited his “research” — despite that very aspect of GM’s experiment failing three years earlier. Franchised dealers are often depicted as “middlemen” hiding behind state laws and providing little value to car buyers. But proponents of a factory-direct system fail to identify system-wide savings if manufacturers were to provide the same services that dealers do to satisfy the needs of each customer. Then there’s the issue of recalls. Nearly 14 million GMvehicles have been recalled in the U.S. through the first five months of the year — which includes GM brands abandoned in bankruptcy. Franchised dealers act as advocates on behalf of the customer when it comes to warranty and recall repairs. Dealers are compensated for these repairs and understand the importance of performing this work to the satisfaction of their customers. Factories, by contrast, would try to contain such post sales expenses. Proponents of factory-direct sales want to believe the car buying process can be reduced to simply “point and click.” That is not the reality of such a complex transaction for the vast majority of car buyers. Dealers stock inventory ready-for-sale, offer test drives, appraise trades, arrange financing on the new vehicle and payoff existing loan balance on the trade, interact with the DMV to replace lost titles on trade-ins, register cars and obtain license plates, calculate and pay sales taxes, andmanage and retain all documents associated with each transaction. Local dealers make a very complex process about as simple as it can possibly be. The debate about the value of franchised dealers to both auto companies and consumers is likely to continue as more voices weigh in, including those whomisunderstand the reality of buying a car, or the responsibilities of dealers. But these voices have failed to explain how a “factory direct” system facilitates competition and performs the services demanded by car buyers with no penalties in cost, time and convenience. For now, the franchise dealer network is the most efficient way to distribute and sell new cars and trucks. Maryann Keller is managing partner at Maryann Keller & Associates LLC.