Trends in consumer car purchases shift to online — partly

Car consumers aren’t all the way there when it comes to doing 100% purchasing online. Yet, industry waters are saying the trend is slowly shifting.

The clear-cut definition of online car-buying is blurring. Most consumers begin the purchasing process by researching and comparing different models. They look for sales and scour social media for owner experiences. They use online car-loan calculators. And when the research portion is complete, buyers gravitate to dealerships to kick the literal tires and take it for a test spin.

JD Powers defines online car buying as all the pre-purchase research as well as completing the buy 100% online. About 75% of new and used-car buyers go online and use apps and websites to begin the process. Sometimes they begin directly with the automaker. Some go right to the dealership of choice.

What does the future of car-buying look like? Not much different — for now, says Mike Szudarek, automotive practice lead at Detroit Public Relations firm Marx Layne & Company. Car buyers consider a new set of wheels a major financial commitment. A test drive and feeling the leather seats and wooden consoles complete the decision to buy. More than half of the buyers need to experience the car in person before they buy.

Used-car buyers are more likely to take it all the way through with organizations like Carvana or Vroom. A key piece of their marketing is convincing car buyers and sellers to forgo trips to the dealership or dealing with pesky salespeople. With some swipes within an app, car buyers can trade in the old and have the newer delivered. This trend is catching on as Tempe, Arizona-based Carvana is growing rapidly.

It started with an idea where buyers could select their vehicles from a multi-story car vending machine. In response to Covid19, Carvana rolled out touchless delivery and pickup. In Q2 of 2020, Carvana said sales increased 25%. Industry experts point to Carvana’s success as an indication that the industry of hassle-and-salesperson-free car selling and buying.

Sara Arbour and her family in Jenkintown, Pa., said using Carvana is like “hitting the easy button.” She listed her used vehicle on Carvana, supplied the documentation, and signed documents. She said the process went by quickly, and the money arrived fast, too.

“I do not enjoy the hours of life being wasted inside the dealer in order to get a new car,” she said.

Arbour, who represents a growing segment of purchasers, said she would definitely use the system again—but buying a car online?

“Maybe if it were a new type of car. All electric. Or a Tesla or something different,” she said. But the test drive, kicking the tires, and inspecting the interior would follow even after checking on the car’s history.

Trends indicate online car-buying habits could change. Original Equipment Manufacturers (OEMs) are working to make the process more seamless as they work with dealerships. Most in the market (about 66%) want price quotes and online financing in place before they step onto the dealership lot.

To that end, dealers face potential customers who want price transparency and “unbundling.” This concerns dealers and OEMs because it forces a shift in a business model that depends on trading in an old car that gave dealerships flexibility in putting together a deal. Today’s buyer wants to know upfront how much a vehicle costs with no haggling. This heightened price transparency equals more competition (good for the consumer) and smaller profitability (not so good for dealerships).

Dealers and OEMs are faced with making the shift to closing the deal to trusted hand-holders who shepherd consumers through the buying process.