Dealer Debates: The Dealership Model Is Broken
About this episode
Host Tommy goes head-to-head with Bailey, a veteran Lincoln salesman, to debate whether the traditional dealership model is fundamentally broken. Tommy argues that franchise laws artificially protect dealerships that fail to provide real consumer value, claiming services like vehicle prep are already reimbursed by manufacturers. Bailey defends the dealer profit margin, pointing to the hands-on service, vehicle transport, and crucial tech education provided to buyers, especially elderly customers. It is a fiery, unfiltered look at the friction between direct-to-consumer advocates and traditional dealership staff over what constitutes fair profit.
In this video I opened my live stream to car salespeople and industry insiders who disagree with me and gave them the floor to say whatever they wanted directly to my face.One by one they called in, made their case, and by the end of the conversation most of them ended up agreeing with me on the biggest problems in the industry.
PDI inspection
"So, I mean, when it comes to all that stuff, we obviously have mechanics that we have to pay to go through the car, take all the stuff off from, do their PDI inspection and all that stuff."
A final checklist inspection that a mechanic does on a brand-new car right after it arrives from the factory to make sure everything works and it's safe to drive.
Pre-Delivery Inspection (PDI) is a thorough check performed by dealership technicians on new vehicles before they are delivered to customers. This process ensures there is no transit damage, all fluid levels are correct, and all electronic systems function properly.
Lincoln
"Being at a Lincoln dealership. It's kind of more, we try to take as much time as we can to go over the car to make sure they really do understand the vehicle."
Ford's luxury brand that makes high-end SUVs like the Navigator and Aviator.
Lincoln is the luxury vehicle division of American automaker Ford Motor Company. Established in 1917, Lincoln is known for producing premium sedans and SUVs, historically competing with Cadillac in the domestic luxury market.
Tesla
"And on top of it, do we not think that like, why can Tesla figure it out? Tesla can go through the entire car, teach me how to use everything. They don't have a sales model."
The famous electric car company run by Elon Musk that sells cars directly to buyers online instead of using traditional dealerships.
Tesla is an American electric vehicle and clean energy company founded in 2003. Tesla pioneered the modern EV market with its direct-to-consumer sales model, bypassing traditional franchised dealerships entirely.
franchise laws
"And the only reason why the dealership model is still here is franchise laws. If they do not add value to the consumers, the things that you're mentioning are really nice."
Rules made by state governments that force car makers (like Ford or Toyota) to sell their cars through local dealerships instead of selling them directly to you online.
Franchise laws are state-level regulations in the United States that protect franchised car dealerships by preventing auto manufacturers from selling vehicles directly to consumers. These laws historically aimed to prevent manufacturers from competing with their own dealer networks.
Group 1 Automotive
"Because we're talking about dealerships that, you know, group one averaged over $4,000 per cardio and profit."
One of the largest corporate groups in the US that owns and runs hundreds of local car dealerships across different brands.
Group 1 Automotive is a major international Fortune 500 automotive retailer headquartered in Houston, Texas. It operates hundreds of dealership franchises across the United States and the United Kingdom, selling new and used vehicles and offering vehicle financing and service.
invoice price
"If that's what you're saying, the only value to dealerships is teaching us how to use cars, then like, why not just sell everything for invoice?"
The price the dealership theoretically paid the manufacturer for the car before any extra discounts or bonuses are factored in.
The invoice price is the initial price that a manufacturer charges a dealership for a vehicle. While historically considered the dealer's "cost," the actual cost is often lower due to manufacturer incentives, holdbacks, and rebates.
Toyota RAV4
"So if somebody comes in and says they want a RAV4, you have to still go through that needs assessment because who knows if they can afford it?"
A very popular compact SUV made by Toyota that is known for being reliable, spacious, and fuel-efficient.
The Toyota RAV4 is a compact crossover SUV powered by a variety of inline-four engines, including highly efficient hybrid and plug-in hybrid powertrains. Introduced in 1994, it is widely credited with pioneering the modern crossover segment by combining SUV utility with passenger-car fuel economy and driving dynamics.
Rivian
"I mean, Tesla's a premium model there, Rivian's a premium model. More consumers want to go to that."
A newer electric car company that makes rugged electric pickup trucks and SUVs designed for outdoor adventures.
Rivian is an American electric vehicle manufacturer founded in 2009, specializing in electric adventure vehicles. Like Tesla, Rivian utilizes a direct-to-consumer sales model and operates its own service network.
rate markup
"The thing I'm disagreeing with to a degree is you've multiple times stated rate markup and there is almost no rate mark these days."
When a dealership gets you approved for a loan at a low interest rate, but tells you the rate is higher so they can pocket the difference as extra profit.
Rate markup is the practice where a dealership's finance department increases the interest rate on a car loan above the "buy rate" approved by the lender. The dealership retains the difference as profit, often referred to as finance reserve.
finance manager
"My general idea is that a finance manager, because I was in the back office, will act as if they have a fiduciary duty and consumers will blindly trust finance managers because they think they do have fiduciary duty and they don't."
The person at the dealership who handles your loan paperwork and tries to sell you extra things like extended warranties before you sign the final papers.
A finance manager is a dealership employee, often working in the F&I (Finance and Insurance) office, responsible for securing vehicle financing, processing paperwork, and selling aftermarket products like extended warranties and gap insurance.
window etching
"These owners are such grubby, grubby guys. Like I, we have window etching. I don't, you know what that is probably."
A security feature where the car's serial number is carved into the windows to make it harder for thieves to sell. Dealerships often charge a lot of money for this, even though it's very cheap to do.
Window etching is a security measure where a vehicle's identification number (VIN) is chemically etched into the glass windows to deter theft. Dealerships often sell this as a high-margin add-on, though it can be done cheaply by consumers.
flat rate
"And flat rate is where they make all their money. You're 100% correct in saying that that a dealership makes the majority of their money in service because tech may take 20 minutes on a vehicle, but the book time says that that job was two hours."
A system where mechanics are paid based on how long a job is supposed to take according to a manual, rather than the actual hours they spend working. If they work fast, they can make more money.
Flat rate is a compensation system for automotive technicians where they are paid a fixed number of hours for a specific job, regardless of how long it actually takes them to complete it. This system incentivizes speed and efficiency.
book time
"And flat rate is where they make all their money. You're 100% correct in saying that that a dealership makes the majority of their money in service because tech may take 20 minutes on a vehicle, but the book time says that that job was two hours."
The official estimated time it should take to fix a specific part of a car, which dealerships use to calculate how much to charge you for labor.
Book time is the standardized estimated time required to perform a specific repair or maintenance task, as published in industry guides. It forms the basis of flat-rate technician pay and customer billing.
warranty work
"And it may have changed since I've been at a dealership, but technicians make literally like bare minimum nothing on warranty work."
Repairs done to fix a broken part on a car that are paid for by the car manufacturer because the car is still under its original quality guarantee.
Warranty work refers to repairs performed on a vehicle that are covered under the manufacturer's factory warranty. The dealership is reimbursed by the manufacturer for parts and labor, typically at lower rates than retail customer pay.
Jeep Grand Cherokee
"Like, okay, I want a Jeep Grand Cherokee, and I look at five different Jeep stores, and if we were to eliminate the competition aspect, then it wouldn't really beat to shop around..."
A popular mid-size SUV made by Jeep that is designed to be comfortable for daily driving while still being able to go off-road.
The Jeep Grand Cherokee is a mid-size SUV traditionally utilizing a unibody chassis combined with robust four-wheel-drive systems. Introduced in 1992, it redefined the premium SUV segment by offering luxury-car comfort alongside genuine off-road capability.
PVR
"When you were in finance, you say you were the top PVR. You were doing really well. What is it that you were doing differently to help the consumer in a better way?"
A term dealerships use to measure how much average profit they make on every single car they sell, including the loan and warranty sales.
PVR stands for Profit Per Vehicle Retailed. It is a key dealership financial metric that measures the average gross profit generated from each vehicle sold, combining front-end gross (vehicle sale) and back-end gross (finance and insurance products).
Doug from Benz and Bowtie
"You know, Doug Benz and Bowtie is a really good example. He's trying to make an impact. I don't think Benz and Bowtie's can actually change an entire industry."
A popular internet personality and car expert who makes videos explaining how dealerships work behind the scenes to help buyers get better deals.
Doug is an automotive content creator and dealership insider who runs the "Benz and Bowtie" channel, focusing on dealership transparency, car buying advice, and industry practices.
Honda Civic Si
"Like for example, we're looking at the Civic SI. I call it every single dealership, not one of them had it pre sold. Everybody had one or two to three available."
A sporty, fun-to-drive version of the standard Honda Civic that comes with a manual transmission and a more powerful engine.
The Honda Civic Si is a sport-compact variant of the Civic, powered by a high-revving turbocharged inline-four engine paired exclusively with a manual transmission. First introduced in 1984, it is celebrated for delivering accessible performance, sharp handling, and everyday reliability.
Honda Civic Type R
"Like if you look at the type R, for example, if you go to LA right now and you call any dealer in LA, you'll find 48 of the exact colors you want."
The fastest, most extreme version of the Honda Civic, built for high-speed track driving but still legal to drive on public roads.
The Honda Civic Type R is the highest-performance version of the Civic, featuring a turbocharged 2.0-liter inline-four engine, aggressive aerodynamics, and a track-tuned suspension. Since its global expansion in the late 2010s, it has set front-wheel-drive lap records at major circuits worldwide.
Lexus GX 550
"The GX 550 is a good example of a car that actually has limited inventory. Again, I believe when you only allow dealerships to sell cars, it allows dealerships to set the market on a car and not be fair with it."
A large, luxury SUV made by Lexus that is famous for its boxy look and its ability to climb over tough off-road trails.
The Lexus GX 550 is a luxury mid-size SUV built on a rugged body-on-frame platform, powered by a twin-turbocharged V6 engine. Introduced for the 2024 model year, it combines high-end luxury with serious off-road capability and a boxy, retro-inspired design.
AutoNation
"And there's collusion that is, that does exist when there's multiple dealers and auto nation, how many dealers out of a city, there's a world where you might live in a city where every dealer is owned by auto nation."
The biggest chain of car dealerships in America, owning hundreds of stores that sell many different brands of cars.
AutoNation, Inc. is the largest automotive retailer in the United States, operating over 300 new vehicle franchises across the country. Headquartered in Fort Lauderdale, Florida, it is a major corporate player in the automotive retail market.
Dodge Challenger SRT Demon
"I was working with Jeep when they came out the demon. And the demon obviously was one of those cars, super rare, and they were marked up a lot..."
An incredibly powerful, limited-edition muscle car made by Dodge that was built specifically to go as fast as possible in straight-line drag races.
The Dodge Challenger SRT Demon is a limited-production drag-strip-focused muscle car powered by a supercharged 6.2-liter Hemi V8 engine producing up to 840 horsepower. Released in 2018, it was designed specifically to dominate quarter-mile acceleration runs and was delivered with a crate of specialized drag-racing parts.
vehicle service contract
"I had somebody pull out their phone in the finance office with me and ChatGPT was telling them what a good deal is for a service contract for that vehicle based on the amount of time the service contract will be for."
A paid plan (often called an extended warranty) that covers the cost of fixing your car if it breaks down after the original factory warranty has run out.
A vehicle service contract is an optional agreement that covers the cost of certain repairs and services after the manufacturer's warranty expires. Often referred to colloquially as an "extended warranty," it is technically a service contract sold by third parties or manufacturers.
Honda Crv
"...hree. And I buy a Honda road or whatever. I buy a Honda CRV every single time. And I'm the person that just s..."
The Honda CR-V is a medium-sized family vehicle made by the Japanese company Honda. It is designed to be easy to drive, spacious on the inside, and dependable for everyday tasks like commuting and running errands. It is one of the most common SUVs on the road because of its reputation for lasting a long time.
The Honda CR-V is a highly popular compact crossover SUV renowned for its practicality, safety, and strong resale value. As of 2026, the sixth-generation model offers both traditional gasoline and highly efficient hybrid powertrains, making it a staple choice for families. It is frequently discussed in automotive circles as the benchmark for reliability and ease of ownership in its segment.
Genesis
"I think that it doesn't fall necessarily as much on the dealership's responsibility to resolve that. I think that it's down to the manufacturers as well, that, you know, if you look at a brand like Genesis, for example, that doesn't allow any form of negotiation..."
Hyundai's luxury car brand, similar to how Lexus is to Toyota, known for making stylish and high-tech luxury vehicles.
Genesis is the luxury vehicle division of South Korean automaker Hyundai Motor Group. Established as a standalone brand in 2015, Genesis has quickly gained acclaim for its high-quality, rear-wheel-drive-based luxury sedans and SUVs.
Hyundai Genesis
"...exist. A manufacturer can't control that. So like Genesis negotiates. We negotiate all the time. It's just ..."
The Hyundai Genesis was a large, comfortable luxury sedan made by the South Korean manufacturer Hyundai. It was built to offer upscale features, like leather seats and a smooth ride, without the high price tag of older luxury brands. Hyundai eventually turned the 'Genesis' name into its own separate luxury car company.
The Hyundai Genesis was an executive luxury sedan that offered premium features and strong performance at a more accessible price point than traditional luxury brands. Its critical and commercial success ultimately prompted Hyundai to spin off 'Genesis' into its own standalone luxury brand. Today, the original Hyundai-badged models are highly regarded on the used market for their quiet cabins and robust V6 or V8 engine options.
triple net
"It's not like, oh, you bought in three cars, I'm going to give you, you know, triple net, because you bought in three cars, you paid MSRP before."
A car buying term for getting a price that is even lower than the official factory invoice price, by stripping away all the hidden bonuses and discounts the dealer gets from the manufacturer.
Triple net is a dealer pricing term referring to a vehicle purchase price that is below invoice, typically calculated by subtracting manufacturer holdbacks, dealer advertising associations, and other factory-to-dealer incentives from the invoice price.
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