Florida Governor Ron DeSantis has approved a bill partially banning direct-to-consumer car sales in the state, a move set to make the most pro-dealer state even more of a car dealer’s paradise. The legislation, heavily influenced by the Florida Automobile Dealers Association (FADA), also imposes restrictions on automakers, limiting their ability to penalize dealers who choose to mark up car prices. The new Florida law is being lauded by car dealer associations. Make no mistake: House Bill 637 is bad news for consumers, no matter how you look at it.
Florida Bans Legacy Automakers From Selling Direct-to-Consumer
The Florida dealer lobby played an instrumental role in drafting and pushing through the bill (HB 637). For dealers, their efforts have paid off. The legislation mandates that traditional automakers must sell their vehicles through approved dealers, reinforcing the conventional car sales model and curbing the growing trend of direct-to-consumer sales.
However, the law includes a specific exception for electric vehicle giant Tesla. Tesla was the first to find success with its direct-to-consumer model. By including an exception for automakers who have never sold via a dealership model, Florida is steering clear of a clash with the #1 EV seller. This exception could potentially pave the way for other electric vehicle brands like Lucid and Rivian to continue their direct-to-consumer sales in the Sunshine State.
FADA President, Ted Smith, addressed this carve-out. “We made a clear delineation between a manufacturer that has never had dealers and maybe never will, and those who have been heavily dependent upon their dealerships to be their marketing and sales presence in Florida.”
Protecting the Right to Markup New Cars
Another part of the bill allows dealers to set their own prices without adhering to the manufacturer’s suggested retail price (MSRP). The new law prohibits automakers from penalizing dealers for markups. The bill also explicitly restricts automakers from limiting allocation to dealers who impose markups. Equally, automakers are prevented from rewarding dealers who choose to sell at or below MSRP.
But wait, there’s more. The bill states that manufacturers must pay dealers eight percent of the revenue from any post-purchase electronic vehicle upgrades or activations sold within the first two years of purchase. This includes both one-time and subscription-based upgrades, potentially pushing prices higher for these additional services. Evidently, car buyers will have even more reasons to reconsider subscriptions for heated seats or over-the-air updates for acceleration boosts.
The Dealership Lobby Has a National Presence
These changes highlight the huge influence of dealer lobbies in the United States. In the most recent election cycle, 85.5% of U.S. Representatives and 57 Senators received campaign contributions from auto dealers. This influence is so great that even the Consumer Financial Protection Bureau (CFPB), established in 2011 to protect consumer interests, has a provision prohibiting the agency from directly monitoring dealerships.
Ultimately, the landscape of car buying continues to evolve, with power plays between manufacturers, dealers, and legislators. At CarEdge, we’re committed to helping you navigate car buying to find the best deals.
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Stay tuned as we continue to monitor the impact of this new Florida Law on car buyers in Florida and potentially beyond.