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Are Direct Auto Sales Good for Consumers?

Tesla Motors, a manufacturer of electric cars, has announced plans to open a store in Milford, Connecticut. Aside from being known for making electric cars, Tesla has gained significant attention through its innovative marketing strategy. Unlike traditional manufacturers, Tesla does not use dealers to market and sell its product. Rather, buyers purchase cars directly from Tesla at retail stores (often located in shopping malls) or on its website.

The use of direct sales may provide significant benefits to consumers. Purchasing a car from Tesla is similar to a traditional retail sales experience-the price on the car is the price that you'll pay-saving consumers from hours of tedious and potentially manipulative negotiations. Additionally, because the retail stores are factory-owned, there is no profit-seeking middleman. The absence of dealerships may also reduce the likelihood that consumers will be manipulated into purchasing unnecessary add-on products, like GAP insurance and service contracts.

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