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NADA Moves Aggressively To Defend The Dealer Franchise System

Jul 08, 2014

Franchised car dealers have been called monopolists, middlemen and worse for several months. The National Automobile Dealers Association (NADA), State associations and dealers across the country are defending their role and fighting back against complaints that the industry is “protectionist,” not able to compete in the digital world of the 21st century and adds unnecessary hassle to the vehicle buying experience. NADA recently launched a multi-pronged national communications effort explaining the many consumer benefits of the dealer franchise system. As part of the push, NADA has launched a website ( with fact sheets and animated videos about the dealer franchise model.NADA also recently released a study entitled “Auto Retailing: Why The Franchise System Works Best,” which highlights why the dealer franchise system is the most efficient and effective way for auto manufacturers to distribute and sell automobiles nationwide.Key findings from the NADA study include:

  • The average dealership today requires an investment of $11.3 million, including physical facilities, land, inventory and working capital.
  • Nationwide, dealers have invested nearly $200 billion in dealership facilities.

  • Annual operating costs totaled $81.5 billion in 2013, an average of $4.6 million per dealership. These costs include personnel, utilities, advertising and regulatory compliance.

  • The vast majority—95.6 percent—of the 17,663 individual franchised retail automotive outlets are locally and privately owned. They generate billions in state and local taxes annually and provide significant employment opportunities that help build goodwill in the community.

  • Manufacturers benefit from the high return on capital invested in manufacturing vehicles, as opposed to the low margin in retailing them.

  • Dealers bear the cost and risks of these investments—at virtually no cost to the manufacturers—and provide a vast distribution channel that benefits the consumer.

The complete study is available on NADA’s “Get The Facts” website (, NADA also recently released a study by noted auto industry consultant, MaryannKeller, entitled “Consumer Benefits of the Dealer Franchise System.” Ms. Keller’s study found that factory-direct sales of new cars—either sold online or through factory-owned and operated retail outlets—have not resulted in lower prices for car buyers or increased market share for manufacturers. This report is also available on the “Get The Facts” website.