'A groundbreaking 2019 study by four economists,
"Capitalists in the Twenty-First Century,"
(https://eml.berkeley.edu/~yagan/Capitalists.pdf) analyzed
de-identified data of the complete universe of American taxpayers to
determine who dominated the top 0.1 percent of earners.
‘The study didn’t tell us about the small number of well-known
tech and shopping billionaires but instead about the more than 140,000
Americans who earn more than $1.58 million per year. The researchers
found that the typical rich American is, in their words, the owner of
a “regional business,” such as an “auto dealer” or a “beverage
distributor.”’
'Comparing data from the appendix of the economists' study
with data from the SUSB Annual Data Tables put out by the Census
Bureau, I estimate that more than 20 percent of auto dealerships in
America have an owner making more than $1.58 million per year.'
No fooling. A local car dealer used to have a 100 foot yacht moored at the Inner Harbor in Baltimore. As a result of the 2009 recession, he had to sell it and close at least one of his stores. I found this out when I bought a new Cobalt from his Chevy dealership that was closing. I mentioned the yacht and the accounting manager told me he had to sell it. I imagine he bought another one by now.
Yes, dealerships can make a LOT of money and so can beverage distributors (especially beer!) They are very desirable franchises so they are difficult to get.
People LIKE new cars… and they really LIKE their beverages!
As long as nothing is preventing someone from owning a dealership if that’s how they want to spend their time, I see no problem. However if there are difficult to get around restrictions in place to own a dealership, in other words dealership owning isn’t based on free-trade, this issue indeed could be a problem that needs correction. It’s an interesting article in any event, thanks OP for the top post!
I think you generally stand to make (or lose) the most money owning your own business (or franchise) rather than working for someone else. So, it makes sense that folks who own the dealership make pretty decent money (or lose quite a bit, I suppose, if the franchise fails). If you asked me if the owner of the local dealership made more than the guy selling insurance, for example, I’d guess the owner of the dealership.
I don’t mind that they make a lot of money. I posted the article so people could read about it. Auto dealerships and beverage distributors make a lot of money not because people like cars and beer so much but because they have limited competition by recruiting government support. People like to eat, too, but grocers aren’t as wealthy. In a free market they would be as wealthy as grocers, pharmacists, and gas station owners - and prices would be lower and there would be more of them.
The ONLY dealers I know that ever failed were ones that did very poor management. When car sales were up (like they are now) they rake in the profits and not put any money back into the business. Then when times were hard, they didn’t know how to manage their money correctly and they failed or got bought out. The smaller and more fiscally conservative dealers always seemed to survive. The large ones who would take out massive loans every year to buy a large inventory were the ones that seemed to fail the most. But when times were good, they made huge profits.
I dunno, pick a business and there are good ones and bad ones. The former Buick dealer in town retired and drives about a 10 year old Toyota. I was friends with the family that owned the Ford/Mercury dealership and they were not poor but not rich either. I remember telling my dentist that they must make a lot of money because a dentist was building a million dollar cabin at the lake. He said he must have inherited money.
Everyone thinks everyone else makes a lot of money. Now a contractor in town donated $50,000 for an exercise facility at the high school. Where did he get his money? Started in his basement and went from there. Died before he could spend it.
When my Buick-GMC dealership failed in 1974 it was due to a combination of a poor location and some very bad decisions on my part, including being “out of trust” with GMAC.
Had a dealer in OKC about 8 years ago who was going to build the biggest house in the U.S. He bought 140 acres of prime real estate for this 92k sq. foot home. More of a castle actually with turrets, spires, moat, and a drawbridge. It would take a full time employee just to keep it vacuumed.
Then an irritating divorce came along and stopped it. He claimed he was broke and she said she could not get by on 40 grand a month personal expenses; normal bills excluded. The house manager and chef would have to go.
Well sure there are local ordinances that might restrict where a dealer could locate, but these are franchises regulated by the manufacturers. They would not allow two Ford dealers side by side and would determine the territory. Remember the big closure of dealerships during the long recession and bankruptcies? A Chevy dealer a few miles away in a small town were forced out and they had been a dealer for about 90 years. The other one in town was forced to remodel with a new front, show room, etc. to meet requirements. Of course there are the conglomerates that own a number of dealerships and they seem to do OK. The Acura dealer I go to used to be the Buick dealer in downtown St. Paul in the 50’s. Waiting for my car, I read the history and go “oh yeah I remember them way back.” Another dealer up there (Chrysler I think) is out of jail now so things didn’t go so well for him. The guys that had millions in used car inventory but couldn’t sell them until the air bags were replaced. I think I’d rather have a Coca Cola bottling plant, but then the price of aluminum . . . and I remember the “ban the can” movement in the 70’s that we fought and finally won. Woulda put the can plant out of business but they didn’t care. I’m rambling too much. Guy’s got a right to make a profit-still, try to cheat me though and no holds barred.
I guess my version of the free market economy is if you set up a fruit stand and someone decides to set up their own fruit stand across the street, then you don’t complain, instead just compete with each other. The fruit stand who best meets the customer’s needs wins, and that’s why a free-market economy wins over others. There’s no guarantees in other words. Business’s are a risk, and business failures are to be expected.
Actually you want clusters of car dealers together the same as you want clusters of gas stations together. It generates more traffic for everyone and traffic means more sales. So you drive by one fruit stand and start to think maybe I should have stopped there but then you get to the next one where there are two or three together and that’s where you go.
Dealers are like franchises. Makers limit the number of dealers, they are HUGE investments that take years to pay off. Much different than a fruit stand.
Privileges and limitations on competition. The article points out that auto dealers and beverage distributors benefit from state government regulation.