Bright Idea #53: Anybody Need a Ride?

Posted on February 06, 2006
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Several Arizona laws protect auto dealers from competition’"resulting in a higher sticker price on all cars. The laws prohibit manufacturers from selling cars, parts or offering financing to consumers without going through a dealer. These classic regulatory land mines allow vested interests to stymie competition.

By cutting out the dealer middleman, direct manufacturer to customer sales promise substantial savings. Research shows auto dealers add from one to four percent to the cost of a car. For a $20,000 car, this equals $200 to $800. Similarly, the sale of cars over the Internet, which these laws also prohibit, has been found to save consumers an estimated two percent. Ending protections for middleman dealers could save Arizonans over $300 million per year.

Auto dealers counter that they provide local, more immediate service that is superior to the Internet or direct manufacturer to consumer service. That may very well be, but this is a judgment better left to consumers than regulatory fiat.

Key Links:

-Michael Mallinger: “E-Commerce and State Protectionism” 
-Solveig Singleton: “Will the Net Turn Car Dealers into Dinosaurs? State Limits on Auto Sales Online”

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