What Is the Agency Model?

For decades, drivers looking to get into a new vehicle typically go to their local dealer and purchase from a sales agent there. Under the agency model, the OEM becomes the focal point of contact for new vehicle purchases, cutting out the middleman or the dealer.

For consumers, this simplified model helps alleviate the burden of determining what a fair value for a vehicle is, negotiating price, and everything else in between. Instead, the vehicle price is determined, helping save time and money for the customers.

But what happens when this agency model expands into the used car space? What does it mean for consumers shopping for used cars and the overall car-buying experience?

Extending the Agency Model to the Used Car Market

In true business fashion, companies expand their business model for further growth. In the states, expanding the agency model to include used cars has been a strategy some manufacturers are considering. But as with any move, there are plenty of challenges that will arise, impacting how the manufacturer operates, and what it means for consumers.

Across the pond and in Europe, some manufacturers have been able to successfully expand their agency model to include used cars. Take, for example, the companies Spoticar and Heycar. Both companies offer direct-to-consumer sales of used vehicles.

How would such an approach look here in the states? It is worth noting that specific franchise laws would be impacted as the U.S. highly regulates how consumers can purchase new vehicles. Unlike other automakers like Tesla that have challenged the law and even filed lawsuits to allow their company to sell directly to consumers, major American automakers adhere to the traditional model of selling to consumers through a dealership.

Positives of an Extended Agency Model for Used Cars

If an agency model for used vehicles were to expand into the states, consumers will likely see some benefits that are too hard to ignore. For starters, drivers no longer have to haggle for used vehicle purchases as they do with their traditional dealers. Assuming that these vehicles are properly valued in price, consumers simply need to find a vehicle they like, then move on through the purchase process.

Drivers can also see a significant reduction in time spent searching for a vehicle that’s right for them. Assuming that an available database would be provided for consumers to look through, they can shop from the comfort of their homes at a time that works for them.

Agency Model for Used Cars Comes With Greater Risk

It goes without saying that a significant amount of risk exists for manufacturers that expand the agency model to use vehicles. For starters, they will need to have in-house or contracted professionals who can assess a vehicle’s value on a case-by-case basis. Maintaining inventory, storage, and repair costs are also big risks that manufacturers will need to take on.

While the extension of the agency model into the used vehicle space has shown to be successful in parts throughout Europe, there’s still a high level of risk associated with implementing the model in the states. Additionally, if implemented, there will likely be a number of legal challenges that manufacturers will have to undergo first.