When it comes to buying a car, prospective buyers can purchase a new or used car from a dealership or, in some cases, directly from the vehicle manufacturer. Direct car sales or direct-to-consumer (DTC) car sales have various pros and cons that can vary for both consumers and wholesale sellers.
As of 2021, bills allowing direct-to-consumer car sales have been introduced in more than 10 U.S. states. Currently, DTC sales are entirely or partially banned in several U.S. states, although states such as Illinois, Michigan, and Virginia are opening the door for direct car sales legislation.
Keep reading to learn more about direct auto sales and determine if the vehicle manufacturer's buying experience is the best for you.
What Is Direct Sale?
A direct sale occurs when a consumer purchases a vehicle from a car manufacturer instead of buying a vehicle through a dealership. In doing so, customers may receive a lower price and have access to a more varied selection of vehicles to choose from.
Today, most vehicle manufacturers include sales features on their websites to sell vehicles directly or to their respective dealerships. Some of the most notable include:
However, with current restrictions on direct car sales, car dealerships participate in each sale by adjusting their inventory based on the number of currently available vehicles.
The various pros and cons of direct sales make direct-to-consumer car sales a controversial topic, partly because direct sales can diminish the business of dealerships or individuals that sell vehicles.
Both legal restrictions and less flexible pricing are potential cons arising from purchasing a car directly from the manufacturer.
What Are the Benefits of Direct Sales?
There are several benefits of conducting direct car sales for consumers and vehicle manufacturers.
Consumers receive a more varied selection when buying directly from a manufacturer instead of going through a dealership. They can also save on additional costs from buying from a dealer.
Customers can skip out on the hassle of the buying process and purchase a car directly from the manufacturer’s website.
When purchasing from a dealership, customers in part pay for the work the dealership has done, such as:
- Transporting the vehicle to the dealership
- Staffing the dealership
- Performing necessary upkeep and maintenance for the vehicle before when it is purchased
When customers purchase directly from the manufacturer themself, they pay a wholesale cost without any added feeds from the dealership.
This means that they can receive lower markups on the cost for each vehicle, and manufacturers can sell their inventory directly, with a final price that they determine based on the current market.
Many dealerships will have a varied selection of different vehicle options from a particular manufacturer.
However, due to the restrictions of cost and space that apply at a dealership, customers will not have as large of a selection as they would when purchasing directly from a vehicle manufacturer or buying online on a manufacturer’s website.
Opting for a direct auto sale can make it easier to access and purchase the car you have your eye on. This is especially useful if you are interested in a specific make or model of a vehicle (such as a Ford F150, Toyota Camry, Toyota Sienna, or a Honda SUV) from a particular manufacturer.
What Are the Cons of Direct Car Sales?
In addition to the benefits that direct car sales can have for both manufacturers and consumers, some cons can make it more challenging, less convenient, and less financially wise to purchase a vehicle directly.
When going through the direct car buying process, there are some downsides. Some of the most significant include:
- Inability to test drive new cars
- No option to trade in old vehicles
- Lack of showrooms displaying available options
Legal restrictions on purchasing a car directly can make it significantly challenging to access manufacturers that conduct direct auto sales legitimately and legally.
With significant nuances depending on the state you are located in, it can be complicated and confusing to decipher what your state allows and what legislation is in place when it comes to purchasing a car directly from a vehicle manufacturer.
There are total direct car sales bans in ten U.S. states, including Oklahoma, Nebraska, Wisconsin, West Virginia, Connecticut, Texas, Louisiana, South Carolina, Alabama, and New Mexico.
Other states allow limited sales or have introduced bills to consider direct auto sales, including Virginia, Ohio, New Jersey, Maryland, Pennsylvania, New York, Georgia, and North Carolina.
Less Flexible Pricing
When a buyer purchases a vehicle directly, the manufacturer has no incentive to provide competitive pricing.
Local car dealerships compete with other nearby dealers for your business. In contrast, manufacturers can set the cost of each vehicle themselves, meaning they can raise the pricing of their stock inventory. This can lead to a monopoly and leave consumers with little-to-no pricing flexibility.
Direct car sales can also take away from the local economic benefits of purchasing from a car dealership. Instead of supporting your local dealer and contributing to the economy in your own community, profits from direct car sales are instead received by far-away manufacturers and shareholders.
The Bottom Line
Both direct car sales and dealership transactions can have pros and cons when it comes time to purchase your next car.
Whether you are in the market for a new or used car online, from a manufacturer directly, or from your local car dealership, the next step is to transport your car to you.
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