How would you like to buy your next new car? The traditional method, of course, is to go into a dealership, try one out, negotiate a price and maybe place an order. But is it still the way to go in 2025?
Would you prefer to see a car in a shopping centre rather than an out-of-town estate, avoid the negotiation and order your car direct from the manufacturer at the same fixed price that everybody else will pay? You can then get it delivered to home or a dealership.
This is the essence of a big debate that’s been going on in motor industry circles over the last few years; the traditional car-buying method of purchasing from a franchised dealership versus ‘agency sales’ or ‘direct sales’, where the manufacturer sells the car direct and sets the price, with the dealer – if there is one – acting as the ‘agent’.
The agency concept gained momentum after the Covid-19 pandemic when we got used to the idea of buying cars at a fixed price online and then having them delivered to our homes, and from feedback which said most people found haggling stressful.
The franchised or traditional dealership model
Franchised car dealerships have showrooms and service buildings that they own and run, according to designs and standards set by the brand.
Most manufacturers now allow you to ‘configure’ or ‘build’ your car, and give a sample finance quote, online from their websites. At the end of the process, your details are passed onto your nearest dealership with a summary to test drive and tailor the finance. But the dealer is still responsible for selling you the car.
The dealer buys in a stock of cars wholesale from the manufacturer. Although it is guided by the manufacturer’s retail list price, the dealer can then discount the selling price to suit a customer if it chooses to do so because it owns the vehicle. The dealer can also agree on a price to part exchange your old car against the price of the new car, so you can simply hand over the keys to your old car when you collect the new one.
Dealers are required to buy a minimum number of cars from the manufacturer every month. If a dealer finds itself forced to buy in more cars than it wants (perhaps to boost sales figures or clear the way for a new model), it will inevitably have to discount those cars to move them out again.
The dealership is also linked to a finance company (usually owned by, or working on behalf of, the manufacturer) and sets up any finance deal with the customer, again with room to manoeuvre in order to clinch the sale.
The stores-not-showrooms agency model
The drive to the ‘agency model’ was also spurred on by car manufacturers wanting greater control over the sales process – as well as a greater share of the profit. This has coincided with, although is not limited to, the growth of electric vehicles, which have been more expensive and require clearer explanations to customers unfamiliar with EVs.
Tesla really shook up the market as it spread around the world, as it launched with an agency sales model in most markets. This helped it to keep costs down compared to ‘legacy’ car manufacturers that had huge dealer networks and accompanying infrastructure. Tesla has spaces both in retail parks and inside shopping centres, or you can buy a Tesla from the comfort of your home without having to even walk out the front door.
Other new players like Polestar, also an EV-only brand like Tesla, followed suit. Polestar launched the first of what it calls its ‘Spaces’ in London’s Westfield shopping centre in 2020. It says: ‘Whether you’re a first-time car buyer or an old hand, our experts are on hand to give you as much or as little help as you need, not meet sales targets.’ Should you want to test drive a Polestar, one will be delivered to you.
For those agency cars sales that take place in traditional dealer showrooms, ‘retail partners’ rather than salespeople do all the talking to the customer, answering any questions they might have, but the customer then completes the transaction directly with the manufacturer.
The incentive for the ‘retail partner’ or ‘agent’ is a fixed commission, reported to be around 5% of the car’s value. Where there is a conventional showroom, the customer still turns up to take possession and have a handover as before rather than have the car delivered. Mercedes-Benz has been operating this model for the last few years and is finding it successful after a rocky start.
The agency model means a fixed price
As well as convenience and a desire for increased profit, manufacturers have also pursued agency car sales in a belief that customers tend to dislike the dealership experience. The chance to buy a car without visiting a dealership appeals to plenty of potential car buyers.
A large survey back in 2020 by management consultancy Capgemini Invent found that 80% of UK consumers expected to be able to purchase their next car online. And 64% of UK consumers complained that, on average, it took 2.5 visits at different dealers to ensure the best possible price. Additionally, 78% preferred fixed prices being the same online as in a dealership
An ‘agency’ manufacturer needs to offer a valuation tool for any potential trade-ins and be able to take the cars into stock, but while it will provide an indicative valuation, the end price may or may not be determined at the dealership.
Polestar doesn’t offer a valuation or part exchange process for new cars on its website. It only refers to part exchange in relation to approved used Polestars, saying: “We work with our partners to provide trade-in solutions. Should you wish to trade-in your current car, then please either contact the Space team where you are purchasing your new pre-owned car, or alternatively for further guidance, please contact Polestar Support.”
Tesla offers to completely take charge of the trade-in process, and once provided with the details you submit, it then gives you a sum off the new car (a valuation can be provided before or during your new car order). When the new Tesla is delivered, your trade-in is collected.
Alternatively, of course, you don’t have to part-exchange your current car. You may find that you can get a better price by selling it to a dedicated car-buying service, like the ones in our popular guide.
Pros of agency sales
- There’s no haggling on price. That’s good if you’re not a haggler or just want to know that the price you’re paying is fair and wouldn’t change if you went to another dealer.
- You dictate the pace of the buying process, with no pressure from a salesperson or manager. You can go away and come back as many times as you like without anyone trying to twist your arm into signing up on the spot.
- There’s no spin on car finance because the manufacturer sets the rate and presents all the relevant contractual details in a logical and orderly process for you to read and review at your leisure. Considering the bad publicity car dealers are getting now about hidden commissions, more people may be feeling wary of dealer finance.
- You’re not going to get a hard sell on the endless parade of extras that dealers try to include with every car purchase, from overpriced paint protection to a plethora of different insurances.
- If you’re used to buying things online – as most of us are – it’s pretty much as easy to buy a car as a pair of shoes or a new phone. Both the car and the finance are taken care of, with the car turning up on your doorstep like any Amazon purchase.
Cons of agency sales
- Quite a lot of people actually do like going to a car dealership and enjoy the personal touch. If you’re the sort of person that prefers to make big decisions based on a personal connection, an online form can’t help you much.
- It’s not very interesting if you like the feeling of even getting a little bit of a deal. You won’t get any extras thrown in to sweeten the deal because the dealership’s not concluding it. It’s very much a take-it-or-leave-it scenario.
- There’s usually more help available from a dealer when it comes to explaining how the many functions of your new car work, especially if you want to go back with questions in the days and weeks after you’ve taken delivery of the car.
- The part-exchange value that a manufacturer offers you in an agency model may be less than what a dealer will give you, as dealers need used cars to sell as well.
- The dealer has less incentive to sell you a car as they’re likely to be making less money than via a traditional model.
Going cold on agency sales
In the UK, Mercedes was first ‘legacy’ car manufacturer to start agency sales in early 2023, followed by Volvo. Several other brands also planned to go the same way – Jaguar Land Rover announced that it was going to overhaul its showrooms to feel more luxurious and less formal as it planned to move to agency sales by the end of 2024. BMW was planning to start its ‘new sales model’ with Mini; Ford had started in the Netherlands; Honda was going agency later in 2023 with its e:NY1 electric SUV; and Toyota was eyeing it up as well.
However, things have slowed down since then and some manufacturers are even swinging back towards the traditional dealer model. Franchised dealers were reported to have been unhappy about having made huge investments in their buildings only to see their ability to control their own profits slipping away, while the car makers realised they needed to hold a large number of new cars in stock themselves, which they weren’t used to (having previously offloaded them to the dealers) and were not used to running sales campaigns locally.
Last year, the giant Stellantis group (Fiat/Peugeot/Vauxhall/Citroen/Jeep/Alfa Romeo/DS/Abarth) said it wasn’t going to retailer agency agreements until late 2026 at the earliest. After two years under agency, Lotus returned to a franchised model.
Earlier this year, Volkswagen also made an about-face. It had been selling its EV models in dealerships but via an agency model, while its conventional petrol/diesel/hybrid models were sold via traditional dealer models. In theory, the customer would have noticed no difference at the showroom, as the dealer staff could help them with either. But the fact that dealers were making more money from selling fossil-fuel vehicles than EVs meant that they inevitably pushed customers towards those cars, which was the exact opposite of what Volkswagen wanted. The company has now decided to sell its EV models in the same way as the rest of its cars and vans, which also applies to Audi and Skoda.
Jaguar Land Rover (JLR) recently told its dealers that it was now sticking with the traditional wholesale model after all (although there are currently no new Jaguars on sale to worry about), so customers can either buy their cars online or via the dealer.
Firms such as Toyota, Renault, Hyundai, Kia and Mazda have been wary of upsetting what they felt was a good relationship between dealers and their customers, and have stuck with traditional sales.
Getting warmer
It’s unsure how many of those carmakers who have postponed their agency plans are still intending to follow through eventually. Having already moved to agency in ten European markets last year, Mini UK has now made the switch and its parent BMW is set to follow next year.
Mercedes has declared that its customers and dealers are delighted with its agency selling based on customer reviews. Customers can search for and buy their new car either online or in-store at their local Mercedes-Benz showroom – they will be offered the same price wherever they choose to buy. Mercedes and its dealers still offer national finance offers and incentives, and local marketing.
Even with agency models, dealerships are not going to disappear. In 2024 Polestar had nine ‘Spaces’ across the UK – which isn’t a lot compared to some brands, but in 2025, on a push to increase sales it said it would add to the Spaces with showrooms – expanding from nine Spaces to 17, usually next to Volvo showrooms. It has admitted that it needs dealers to sell more cars.
What’s more likely is a kind of agency/franchise hybrid. You might not know whether your preferred car brand is operating agency sales until the point where would normally start talking about the price and then be steered back to the manufacturer’s online services.
In any case, a lot of car buyers enjoy shopping around for the best price online. If you don’t want to approach dealerships themselves, comparison sites (like our Expert Partner, Carwow) can do it for you, finding the best deal and putting you in touch with that dealer.
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