Franchise vs agency: battle for the future of new car sales

No-haggle automobile product sales are coming to a host of makers inside of the following two years. Alfa Romeo and DS have by now set a timeline for their introduction in mid-2023, and Volkswagen, Mercedes, Audi and Volvo are also seeking to make the swap upcoming calendar year to a new way of providing their models. 

Why the adjust? It is due to the fact a slew of models are switching from the common franchised dealership product to one particular called an agency agreement, which will in effect ensure there is a single, mounted cost throughout all dealers, irrespective of whether they are showroom-dependent or on the internet. 

Obtaining a new auto should be a simple activity, but in reality it is generally pretty significantly from that at the time you get over and above the shortlist. Locating out how considerably a motor vehicle will price tag you is the first big hurdle. Of course, there are company recommended list price ranges, but pretty much each and every personal new-car buyer utilizes one particular sort of finance scheme or an additional and thinks far more about the regular payment than the headline price of the auto. Immediately after all, what does it make any difference if a vehicle’s record price tag is £29,999, when all you actually need to have to know is that you can afford the £299 a month compensation to continue to keep it on your driveway? 

Of system, that £299 figure will rely on a couple factors, also. For instance, how considerably is your trade-in value? And do you have additional cash for a deposit? 

And that is all right before looking at any haggling or discounted which is on offer when you get to the dealership which, in the end, is the organization selling you the automobile. It is a sophisticated system as things at present stand. 

However, in the Uk, nearly each and every non-public motor vehicle is bought this way, by way of franchised sellers. It also means that even even though you may possibly be acquiring a Ford or Vauxhall or BMW, your deal is with the supplier and if anything at all goes incorrect, it’s the dealer that’s, lawfully, on the hook. 

Franchised vs agency, the critical differences

Under a franchise settlement: Below an company arrangement:
● The retail price of the automobile is established by the seller, so haggling is feasible
● Sale deal is among dealer and shopper
● Stock is owned by the vendor
● Dealers can pre-register vehicles to strike a target
● Unique prices involved with the brand name, such as signage, are borne by the seller
● Dealers can price cut autos by ‘giving away’ some of their margin
● The retail price tag of the car or truck is set by the manufacturer, so there is no haggling
● Sale deal is involving the brand and buyer
● Stock is owned by the company
● Dealers can not pre-register vehicles
● Unique costs, these types of as signage, affiliated with the model are borne by the car or truck maker
● Dealers cannot price reduction versions by ‘giving away’ the manufacturer’s margin

Simpler selling 

After far more than 100 a long time of new vehicles remaining sold through franchised dealers, there is a sea-change in the offing as makers think about a new way of marketing. 

Haggling does not translate very well to the web, and that’s partly why suppliers are searching at a program that will indicate a one, fixed value is proven on line to customers. But to do this, automobile makers have to abandon the franchised technique they’ve utilised at any time since Henry Ford started off mass-producing the Design T. 

That is due to the fact in United kingdom legislation, a manufacturer simply cannot manage the price tag at which a dealer sells the vehicle. So if the brand needs control, it just cannot use the franchise design, and in its place must appear at a program the place the company not only fixes the price tag of the automobile, but also would make a agreement of sale straight concerning the purchaser and by itself.

Company design

Known as an agency design, or company agreement, the new method for promoting cars and trucks at a fastened value could however use sellers and showrooms. Nonetheless, you will not be equipped to negotiate more than what you are going to pay back for the car or truck, and these showrooms may possibly be digital instead than physical.

Everybody will spend the very same selling price for a individual make and design of new motor vehicle and you won’t have to stress if you obtained the ideal offer. If you never like haggling with a salesperson, that’s wonderful information. 

Nonetheless, the approach is not quite that uncomplicated. There are however a couple concerns that need to be answered, this kind of as what happens with your component-trade, and indeed, your trade-in may possibly be one spot where by you nonetheless have some leverage in excess of the deal. That claimed, below the new company design a car maker will almost certainly have its have on the internet valuation tool, which would make it quick the two to change automobiles, and also to assess with other on the web valuations.

Preserving prices down

While the go to a no-haggle system might just be found by quite a few men and women as element of the broader march of the web and improved buyer company, the switchover is occurring now for two other good reasons. 

To begin with, some automobile makers believe that that switching to a no-haggle process can assistance cushion the two them, and the buyer, from the mounting price of car manufacturing as the environment moves to battery-electric powered vehicles laden with tech. 

Alfa Romeo is probable to be one of the first manufacturers to go to the new no-haggle model to offer its solutions, alongside with fellow Stellantis model DS. Alfa overtly admits that savings will appear from lessened distribution fees, in other words from the supplier community. 

Jean-Philippe Imparato, CEO of Alfa Romeo, described the switchover. “Do not visualize for one 2nd that the present-day [franchised dealer] model will be secure in the coming decades,” he said. “Take a B-section vehicle 5 decades in the past it expense £10,000, today which is £15,000. If you place the connectivity, the protection and the EV in, it will value £30,000. Do you consider that clients will double their wages, far too? No.” 

He added: “I simply cannot say the price we’ll consider out, but it will be significant. If you add in the EV charges, safety, connectivity, that is 10,000 Euros for each car or truck, a lot more or significantly less, so you have an notion of what we have to do.”

Chip scarcity

The 2nd explanation the go to an agency model is occurring now is that the Covid pandemic has intended that auto production has minimized, thanks predominantly to chip shortages, and desire is outstripping provide. The consequence of these shortages is that new-motor vehicle discounting is presently rarer than it has ever been, which would make the swap to a no-haggle system a lot easier for makers to control. 

Alfa Romeo and DS have been the most vocal about the new no-haggle product sales technique, but other models are regarded to be performing on an agency system for new-automobile profits, far too. These include things like Volvo, Mercedes and Volkswagen in the United kingdom. Nonetheless, other car makers have previously carried out this method in other international locations, most notably Toyota in New Zealand, BMW in South Africa, and Honda in Australia. 

Honda Australia is now additional than 6 months into the new way of offering and has not too long ago claimed that “89 for every cent of clients strongly agree that acquiring a Honda was extremely uncomplicated, although 87 per cent gave the new income knowledge a top ranking of nine or 10 out of 10”.

Online alternatives

Nissan is at the moment demonstrating that it is attainable for a company to use the most current technological innovation to market automobiles on the internet and nonetheless have classic dealers. 

Making use of a studio as a showroom and an actor as a information, people to the firm’s web site can acquire a live Zoom or Teams-style tour of a Qashqai, Leaf or the firm’s new Ariya all-electric SUV. The guide can then wander around the motor vehicle, reply any precise thoughts from the shopper and if the visitor needs to get the car, they are put in call with their closest seller to negotiate the sale. 

John Parslow, Nissan’s head of electronic, mentioned: “The Dwell Showroom has only been reside for a number of weeks, nonetheless we have experienced genuinely favourable responses from our customers. They love that it’s a really personalised practical experience, offers a service geared close to their requires, and means they can love the excitement of deciding upon their up coming new auto from the consolation of their personal property. 

“Depending on the enquiry, we will normally development a lot more than 60 for each cent to a quotation, but the core measurement for us is about client gratification and simplifying their getting journey, and for this we have 95 for each cent-furthermore pleasure concentrations.” 

Parslow also unveiled that existing Nissan owners as perfectly as prospective buyers are employing the program. “We do get prospects who will use the Live Showroom immediately after paying for a Nissan,” he claimed. “In some instances, if they’ve forgotten how a thing will work, they’ve been taking benefit of the on-hand product or service experts that they can speak to from dwelling.” 

The multitude of various strategies of promoting a vehicle both in use now, becoming regarded, or being tested, shows there is clearly a need to simplify the way vehicles are offered, both of those on the net and in the showroom. And whilst haggling may become a matter of the past for some manufacturers, for as prolonged as it operates for other motor vehicle makers, it’s listed here to remain.


It is clear, not all manufacturers will go to this new method, with lots of in the British isles now coming out to say they will be sticking with the conventional franchise design. These include Suzuki, Mazda and Kia. 

Kia’s Uk president Paul Philpott argues that franchised sellers are still the very best way to sustain large degrees of client treatment. “Obviously we’re looking at what’s likely on in the marketplace, but right now we have no intention of shifting towards an company arrangement,” he described. “I carry on to believe that that the worth a franchise seller can bring to the consumer is quite sizeable without a doubt. 

“Most shoppers, to start with, want to try a design just before they purchase and, next, (specifically around new technological innovation) want access to a person they have confidence in who they can converse them by way of the options.” 

Commenting on how to deal with a solitary on the web record value in a franchised design, Philpott explained this wasn’t as essential as communicating a month to month cost to the purchaser. 

“No one goes out and spends £20,000 on their car, they shell out £400 a month,” the Kia boss mentioned. 

“What genuinely matters to the consumer is ‘what can I get on my regular finances?’ and that is dependent on residual values. It is dependent on the acquisition price tag. It relies upon on any low cost the manufacturer is placing in, and any discounted that the supplier is putting in. And that’s a sophisticated calculation,” Philpott added.

All in favour? Not quite…

Sue Robinson, main government of the UK’s Countrywide Franchised Dealers Affiliation (NFDA), implies purchasers threat losing out, because greater management by brand names will eradicate the competitors aspect of the automobile-acquiring process. “An company design will have a detrimental effects on customers’ decision,” she said. “Essentially, OEMs [car makers] will very own the inventory and set fixed prices.”

“Ultimately, with the introduction of uniform pricing, it will mark the end of intra-brand  competition. It is vital that sector regulators acquire techniques to mitigate any adverse impression the agency model can have on buyer preference, as very well as dealer work and investment.”