In the beginning virtually all car manufacturers sold their cars directly to the consumer. Some manufacturers advertised their business by mail, others sold to agents on consignment, or on credit and for cash in advance of delivery.
Some of what we could call the first automobile dealers would rather have sold you a bicycle than a car way back at the turn of the century. Most of those pioneers were bike or carriage merchants, blacksmiths or owners of general stores. Automobiles were typically a sideline sold out of barns and blacksmith shops.
For example- cameras, typewriters and bicycles preceded cars at Ferman Motors in Tampa, Florida which opened an Oldsmobile dealership in 1902.
Back then, you might have been better off riding a bike. Automobiles were as unreliable as the roads they drove on. Also there weren't many roads to support the cars. In some cases, 'dealers' made their own cars (in some cases made from bicycle parts powered by steam, or by gasoline engine).
Early automobile merchants really could not even be called dealers, said Helen Earley, a historian with the Oldsmobile History Center in Lansing, Mich. 'They were selling agents. They only shipped ordered cars. They did not stock cars.'
The Curved Dash Oldsmobile Runabout for example - were estimated to have made $150 gross profit per car. 'They probably purchased the cars from the factory for $500 and sold them for $650,' says Helen Earley.
Oldsmobile had about 45 selling agents for the Curved Dash from 1901-04. Olds produced and sold 425 of these vehicles in 1901, 2,500 in 1902, 4,696 in 1903 and 3,302 in 1904. That would mean the average Olds agent sold 9 cars in 1901 for $5,850 in revenue and $1,350 in gross profits.
Automobiles were a risky business in the early days.
Dealers often had to also be machinists, making some of their own parts. Many early dealerships also sold gasoline. Some offered cars with drivers for rent. Back then, not a lot of people knew how to drive. It was only after 1910 that people became more familiar with the automobile and it became more accepted.
Early dealers were often referred to as 'agents.' The agent system of selling made its general debut in 1902. Some agents operated under a franchise agreement with a seller-buyer relationship.
Factories needed agents not only to store and display their inventory but also to offer cars for test drives. The public had to be convinced that cars were reliable. Franchise agreements required dealers to stock a specified number of vehicles before each selling season, keep a minimum number of demonstrators in stock and be able to repair vehicles.
In the early days of the franchise era 1900-1908, the type of agreement in this period were loosely drawn and didn't contain the numerous express provisions designed to limit the liability of the manufacturer. Manufacturers were held liable for just about any problem the '"agent" had. The "dealer" was not usually able to hold the manufacturer liable.
In years 1908-1910, manufacturers had dropped "agency" terms from the agreement. The dealer had exclusive sales rights. The new agreement stated — that the dealer was not the agent of the manufacturer — in the aspect of the dealer's relations with the public. The duration of the contract agreement was usually one year.
The 1910-1930 period of the franchise history was characterized by rapid expansion, growing concentration on manufacturing, falling car prices, and rising economic barriers against new entries.
The franchise era in the years 1930-1940 saw dealers obligations that were the same as in previous agreements. Mainly that the dealer would maintain a place of business and would develop their territory. One point that was added was the ability for the manufacturer to ship cars to dealers who fell behind on his quota.
In this time the manufacturer had provisions excusing himself for non-delivery of cars to the dealer. One point in favor of the dealer was that the manufacturer had to make payments to the dealer when wholesale prices were cut or models were discontinued.
In the 1940 franchise agreement the dealer had to furnish each customer with an "itemized invoice" of the charges connected with each new car purchased.
The modern franchise agreement came about in 1953.
Under the new agreements, the manufacturer could not ship the dealer unordered cars. Another important point was that General Motors dealers had to give an itemized invoice with each new car sold and the dealer had to recognize the customer's "right" to buy a new car without having to purchase optional equipment or accessories.
The most noticeable point of the manufacturers duties was that the manufacturer was not at all liable for non-delivery.