The article misses the issue. New cars are very nearly sold direct, the dealer doesn't arbitrarily mark up prices, in fact I think some manufacturers prevent it. There is a fixed profit for the dealer, for the most part. The manufacturers go to fairly good lengths to get the cars people want to the dealers too and then they try to have an assortment of dealer customizations that can be done, like the dealer can change the stereo out and do things like that. It's just pure brand for the dealers, why they sell new cars is just to avoid being labeled a "used car dealer."
Service and used cars are the broken market, those subsidize new car sales. "Certified used cars" and such are almost always over paid for. If can be dramatic too, we tracked my wives old Subaru through from trade-in. They gave us about $2000, then the last we saw it it was still in the region (about 80 miles away in a smaller town) listed for just under $8000. It was very clean and needed a new head gasket, they may have done that, maybe not, that would have cost us about $2000 so it didn't cost them that. even if it did they were still asking 100% more and we don't know what price the eventual buyer negotiated.
The laws that protect the dealers may be a problem, it looks like most states just want to protect the big "local" businesses from the big corporations though. The used car market seems like it could really benefit from disruption though.
I work in the used car industry and it hurts my soul. You're absolutely right that it needs disruption, specifically the "buy here-pay here" (BHPH) model.
BHPH sales are when people with no/terrible credit get an overpriced used car financed by the dealership where it was purchased at 29% interest and $300 bi-weekly payments (for example). The dealers bank on the fact that these people will probably default in a couple of months. Then, the dealer repossesses the vehicle (easily with starter interrupt and GPS devices), and then it can be resold at the exact same price (and the dealer can sue for deficiency balances owed by the previous owner if they so choose). The people who have to resort to this way of car buying are already desperate, and the BHPH dealers are designed to profit off of them.
The FTC and Consumer Financial Protection Bureau are slowly starting to catch on, but the lobbying by groups like the National Independent Auto Dealers Association is very strong -- they have A LOT of money, and they're always looking for ways around the law. The latest trend is changing a few words on the contract, calling it a "lease" and ripping off the consumers in just the same way.
When a customer is offered a monthly/weekly price of $X and the car is in the exact condition described by the dealer, it cannot be a ripoff. Now if the dealer is filling their head with nonsense like the car's value will increase over time (a la mortgages), then maybe you might have some fraud aspect.
Laws can't protect stupid people from wasting their money and I don't want a world so locked down where they could. And what's the worst case scenario? The car gets repossessed and their credit goes down (ie less people will trust them to make purchasing decisions in the future). There is no debtors prison and its highly unlikely they would have wages garnished unless the car was destroyed.
The "worst case scenario" is losing your entire source of income, since a working vehicle is NECESSARY to earn a living in most of the US. The people patronizing these BHPH dealerships don't have a choice in what they pay due to damaged credit, so they're forced to choose between an exorbitant interest rate on a vehicle that's marked up significantly, or no way to get to work.
Service and used cars are the broken market, those subsidize new car sales. "Certified used cars" and such are almost always over paid for. If can be dramatic too, we tracked my wives old Subaru through from trade-in. They gave us about $2000, then the last we saw it it was still in the region (about 80 miles away in a smaller town) listed for just under $8000. It was very clean and needed a new head gasket, they may have done that, maybe not, that would have cost us about $2000 so it didn't cost them that. even if it did they were still asking 100% more and we don't know what price the eventual buyer negotiated.
The laws that protect the dealers may be a problem, it looks like most states just want to protect the big "local" businesses from the big corporations though. The used car market seems like it could really benefit from disruption though.