What will be the biggest obstacle to buying cars online in 2017?
The automotive industry had a tremendous year in 2016. The great news included: automakers seeing a third consecutive year of record sales at 17.4 million vehicles, the self-driving car making an amazing leap forward, Elon Musk becoming a superstar and the spectacular rise in venture capital funding for automotive tech startups.
The bad news included: Apple’s failed attempt to get in the game and the potential Trump tariffs and consumers potentially piling on way too much debt for new cars.
The ugly news included: car hacking, the Takata fiasco and the Volkswagen emissions scandal.
But here at vinadvisor, 2016 will be remembered for the strides made by car buying online. Venture capital funding has invested hundreds of millions of dollars in new businesses that do everything from enabling shopping and buying and financing online.
Jim Dykstra, CEO of vinadvisor said about the changing landscape:
“The biggest challenge for dealers is the shift to pricing products rather than selling price. Dealer reticence to offer a contemporary – to ETRADE, Amazon or Venmo – online purchase solution is a problem. The time it takes to get each customer to pay a different price for a new car, trade, financing and aftermarket products limit customer satisfaction and dealer profitability.”
The good news is the move to online sales will dramatically increase efficiency. Salesperson productivity will rise and turnover decline while throughput, service retention, referrals and repurchase loyalty increase from a contemporary online purchase experience like the enjoy with everything else they buy.
Franchise laws or no franchise laws, the change in the auto industry is happening. OEMs are forming “Retail Transformation Projects.” Fin-tech startups are looking for ways to leverage their millennial audiences into car loans. Ride-sharing apps are forcing the industry to rethink the concept of ownership.
2017 is shaping up to be one of the most extraordinary years in automotive history. So, we decided to ask a distinguished panel of experts, professionals and executives in the automotive industry, what will be the biggest challenge to buying cars online?
Here are their responses:
Ian Beavis, COO
“The financing paperwork will remain a huge obstacle as almost 65% of all vehicles sold in the U.S. are financed through a dealer. Many states do not allow the financing to take place outside a dealership or online.”
James Green, CEO
“The biggest obstacle to buying cars online today is the dealer network and how they sell. They have cars that are pre-configured and on the lot which they want to move.
“As a percentage, more Tesla buyers buy cars online than traditional buyers. This is because you can configure it, the price is known and it’s uniform. Nothing will change if you buy online or buy in the store. So why go to the store except to try it? Dealers are the biggest obstacle to on-line car sales.”
Chris Baccus, SVP
“State laws to protect dealerships will continue to be a challenge for complete online purchases. However, dealerships are getting better at enabling most of the deal over online. In fact, last year I bought a car through email with only having to stop at the dealership to sign paperwork and drive off with the new car. So some salespeople get there is a benefit to making the sales process easy for customers using digital communications.”
CEO Ad Agency Online
“For now, the biggest obstacle to this online sales/service marketplace is government regulations limiting online transactions, adherence to current franchise laws and customer hesitancy to make large buying decisions online. The consumer confidence concerns are already eroding with the explosive growth of sites like Amazon, the slow death of large box brick and mortar retail stores/malls along with added dependence on online customer reviews to support a buying decision.”
Chad Pellicioni, Founder
Hype Media Group
“Online competition with digital ads and paid search.”
James Raia, Editor & Publisher
“I think it will remain the possibility of fraud. Hacked emails, bad information, too much personal information distributed on the Internet. I think buyers also still want to the ‘kick the tires.'”
Jill Ciminillo, Automotive Editor
Sinclair Media Group
“Fear. While online shopping is really common in 2017, buying a car online isn’t quite like buying a new pair of jeans. Next to buying a new home, buying a car is the next biggest expenditure people will make, and breaking the traditional habit of “kicking tires” will be a tough one.”
Nick’s Car Blog
“People want to drive the car, especially if it’s higher end, to confirm it’s worth the extra money over a more basic model. For used cars, people want to validate the condition of them. The first hurdle is difficult to surpass until driverless cars become a reality, but the latter hurdle is pretty easy with live video and technologies to confirm the condition of the paint, engine, ECU read-outs, etc.”
NPR’s Car Talks
“It’s the same obstacle that existed 17 years ago when Auto-By-Tel and AutoWeb decided they were going to try and circumvent the dealer model: They ran into massive opposition by dealer lobbying groups at the state level, and it stopped the idea of direct selling in its tracks. I can’t remember the name of the program, but GM had a direct-to-consumer model, too, and the dealer network killed it.”
Shiraz Ahmed, Reporter
“State franchise laws.”
Joe Overby, Senior Editor
“I think meeting regulatory requirements — some of which vary from state to state — could be the biggest hurdle to selling cars online nationwide. And just making sure all the proper paperwork is taken care of.”
Eric Miltsch, Co-Founder
DealerTeamwork.com & AutoOutletsUSA.com
“The biggest obstacle to car buying online will be dealing with the lack of a standard solution available to shoppers. The online buying segment of the industry is still young and fragmented. Trust is a major success factor. Website providers will introduce their own proprietary “shopping cart” approaches. Large dealer groups will continue to run their own trials and lastly, independent bolt-on solutions may be introduced as well.”
“Unfortunately, these solutions are still too far reaching for buyers and they’re not necessarily solving real problems associated with the buying process. Clouding the issue even further are stand-alone platforms that just can’t seem to create traction, such a Beepi (recently announced they will shut down and merge with Scott Painter’s Fair.com) Car buyers still want to deal with a real person, see/touch the vehicle and have the piece of mind they got a good deal. What they don’t want is the broken showroom processes, the long wait times, and the poor customer experience.”
Ed Brooks, Sr. Digital Media Rep.
“The biggest obstacle isn’t technology, or trades, or financing; it’s a lack of desire on the part of the majority of dealers. Doing a car deal, from start to finish online, requires a tremendous number of changes to current processes, including becoming a one-price store and implementing online financing.
“The big obstacle, from my perspective, is that vast majority of dealers that I visit don’t want to give up the opportunity to sit face-to-face with a customer and sell them more — whether it is an upgraded vehicle or finance products. The big dealer groups are the exception. Many of them have been working for years to put the technology, the processes, and most importantly, the mindset, in place to begin to sell cars online.
Philip Reed, Writer
“Dealers still do everything possible to get people to come into the showrooms. So even people who contact dealers with the intention of buying online are routed into the showroom where the sale follows the traditional process.”
Ben Tesler, Founder
“People want to see their specific car in front of them. They want to touch it and drive it before they make one of the biggest purchases of their lives. In cities like New York, San Francisco, Chicago, and even in Los Angeles now people see it less necessary to own a car because of the many different public transportation options as well as ride share services being available within a minutes notice and no need to pay for parking.”
Expert from Ispos Automotive
“In addition to the franchise laws, states have varying finance regulations….so buying a vehicle in one state requires lending covenants that are different from other states. Devising a financial structure that can cross multiple states is daunting and requires acceptance by states attorney’s general.”
Ricky Patrick, BDC Manager
Richard Kay Superstore
“The biggest obstacle will always be the lack of a physical experience with the vehicle. Not many people will buy a vehicle without seeing/driving it.”
Andrew Fails, Photographer/Writer
“The biggest obstacle is the customer being unsure about the quality of the product they are buying. People are concerned about the quality of the vehicle. Also, people think that without haggling they are getting ripped off, and haggling is harder online.”
Maddy Low, Community Manager
“I think the biggest obstacle for car buying online will be increasing mobile needs that auto web providers won’t be able to keep up with Another is really knowing what the price is and being unsure what I’ll actually pay, prices online never seem to tell the real story.”
Kyle Reyes, Founder
The Silent Partner Marketing
“The biggest obstacle to car buying right now is, ironic, dealers themselves. They’re too damn romantic about how business Should be because of how business used to be. They haven’t adjusted to mobile-first and social media driven times and are still stuck in their old ways.”
“Dealers themselves. Consumers have already demonstrated their willingness to execute most of a vehicle purchase online, and there are probably 25% to 45% of new car buyers today who are ready, willing and able to buy cars online. However, car dealers have been so highly optimized for retail showroom sales for over a hundred years that the process structure and business process implementation has been challenging. These entrenched procedures and documentation systems have been the greatest source of systemic resistance to online car sales to date. Let me also insert a big caveat.
“Although I consider dealers to be the biggest obstacle to online car sales, I am also confident and certain that dealers will catch up and implement those processes which will allow the use of online technology to make car buying more convenient. Why? Competition. As more and more American car dealers implement online sales strategies and tactics, they will become a competitive advantage. When that happens, then it becomes a market force and most car dealers will be dragged into the online sales universe kicking and screaming, but knowing that they must in order to remain competitive.”
Joe Webb, President
“There is a level of feel/touch/smell that has been a part of the showroom experience. However as higher dollar transactions take place solely online, the retail industry will continue to fracture away from in-person sales and into more disengaged (yet streamlined) transactions. The primary obstacle that has slowed this transition is the lack of adoption by franchise dealers of transactional technology on their websites. As adoption rates rise, that seamless channel of research and negotiation will be more available and utilized.”
Bill Soule, FounderDigital Video Syndicate
Digital Video Syndicate
“The biggest obstacle may be venture capital investment and stability. The horse is out of the barn with car buying online so it’s inevitable. But with the fall of Beepi, we are already seeing an element of too-much-money-too-soon for several online players. We saw this in 2016 in the solar industry. Buying a car is a major purchase so if too many startups rise and fall there will be a major trust issue.”
“But there is too much money at stake for there not to be a VC-funded arms race to get to the top. Eventually, that issue will sort itself out, and car buying online will stabilize. Why? Stats like these – millennials represent 28% of all car buyers and account for over $1.3 trillion in spending. Millennials trust the process of buying things online.”
Neil Feuling, Senior Director
Auto E-commerce Strategy and Business Development LeEco U.S.
“Finance and incentive confusion. Lack of true pricing transparency for both new and used. Leaky funnel – leads dropped on the floor, lack of real-time follow-up.”
Mark Dubis, CEO
“While online auto shopping will continue to advance in the coming years, most consumers will still be stopping into dealerships to test drive vehicles and finalize their purchases. Most of the preliminary work like qualifying for financing and getting estimates for their trade-ins will be handled online in advance of their dealership arrival.
“Buying a car online is like buying a house online, it’s the type of sale that most consumers will not make online, but will heavily use online sources to do their basic preliminary homework.”
“The biggest obstacle is most people still want to touch it before they buy it. A solution might be having a vehicle locally they could drive and then buy online.”
“From a consumer standpoint, it can be scary to make that big purchase without experiencing the vehicle firsthand. For most Americans, vehicles are the second biggest expense, and like buying a home, it’s not something we’re inclined to do sight-unseen.
“That said, fears around online shopping have been eroding throughout the 21st century. From an industry standpoint, the simplest answer is that the car-dealer lobby has made online sale of new cars impossible. But it will be interesting to see how an organization like Amazon might shake that up.”
Quincy Armstrong, Director of Marketing
Rusnak Auto Group
“Depends what you mean. If you mean challenges to actually complete a purchase online, the challenges are local, state, and federal regulations and the massive amount of paperwork required to complete a car purchase. If you mean shopping for a car online, it’s the transition between online shopping and communicating with a dealership. If the dealership has good training they’ll understand where customers are in the shopping process and personalize the rest of the process.”
Dealer Marketing Magazine
“The lack of a true, tactile interaction with the vehicle is the biggest obstacle to the online buying model. More most buyers, sitting in, driving, and bonding with a vehicle still matters with a big-ticket item that is likely to be lived with and paid for many years.”
“We actually already have second-hand car buying online. Singapore No.1 Car Site for New Car & Used Cars. Instead of visiting three or five dealers. You typically only have to visit one. And you can close the deal in 1 hour or so. Price is more or less fixed at the internet advertised rate.”
Triff Moe Carandang
” Pre-owned cars. It’s hard to find an honest seller.”
“I would say it’s not being able to actually see the car. The pictures they post will be doctored and they could simply leave out scratches or dents from the pictures. It’s also very important to drive a car before you buy it. In the United States, it gets a little tricky if you need a loan to buy it. Banks tend to be a little suspicious of this, and will won’t loan you a much if it were from an actual dealer.”
“Time to make full transparency for websites like Truecar to ensure the general public knows the dealer is charged between $300-$400 for the sale when they buy a car. Websites like 3rd parties must disclose dealers are charged to receive the lead.
“The public thinks these are free services, and they are not. Want to list my inventory on your website? No problem, just disclose your terms with our dealership, and that you charge us to get the email your site invited the customer to send us. Goal for 2017: Real Transparency among 3rd party websites.”
“If this question is for the U.S., there are laws that prohibit entities that are not dealerships from selling a reasonable volume of cars. Thus, even if you were able to get a contract from manufacturers that would allow you to sell cars for cheaper than a certain market, you would be unable to sell more than a handful of cars (specifics depend on state/jurisdiction) without opening a dealership.”
Chris K Leslie
“The need of a physical signature on paperwork.”