When Henry Ford’s Model T revolutionized the car market, affording everyday Americans the opportunity to buy a car, automakers realized they needed local businessmen to sell their product. The car dealership was born. Protected by numerous state laws to manage the initial rocky relationship between dealers and manufacturers, the franchise model has remained the standard for decades.
Lawmakers talk a lot about affordability these days but seem to overlook regulations impacting one of the largest expenses consumers face: buying a car. While necessary in the 20th century, automobile franchise laws have outgrown their purpose and add significant costs. It’s time to rethink their purpose and curtail them, not augment their reach.
A recent American Consumer Institute report highlights the degree to which the dealership apparatus contributes to car prices. Territorial exclusivity laws alone, which dictate distances between dealerships, collectively inflate new car prices by nearly $67 billion each year. The International Center for Law & Economics finds that the dealership stronghold adds roughly $5,000 to the price of the average new vehicle. Costs attributed to the dealer framework—such as overhead, make-to-stock models, and maintaining inventory—are baked into the final sale price of each car.
Kristen Walker is Senior Policy Analyst and Manager for Energy and Transportation with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.theamericanconsumer.org or follow us on X @ConsumerPal