- October 18, 2020
- Posted by: Stratford Team
- Category: Markets
The pandemic forced dealership to figure out new ways to sell cars.
Spencer Platt/Getty Images
- COVID-19 was supposed to transform the traditionally in-person, time-consuming, analog and often unpleasant car-buying process.
- Although there was innovation and some consumers bought cars almost entirely online, the dealership model remains the primary way to get a new set of wheels.
- As the US market recovers and a second or third wave of the pandemic looms, the old way of doing business could be tested again.
- Visit Business Insider’s homepage for more stories.
At a time when you can buy almost anything online with a click, purchasing a car remains defiantly old-school.
Prior to the coronavirus pandemic, most customers who wanted to buy or lease a new vehicle had to visit a dealership, take a test drive, sit down with a salesperson to come to terms, and then spend hours with a finance professional to work out a car loan.
The process has earned the car-buying experience a bad name and compelled many customers, especially young ones, to seek an alternative.
When COVID-19 made in-person meetings a health hazard, many assumed that change was on the way. For some buyers, it arrived.
“I signed a few things and drove away”
Dealers have traditional wanted customers to visit in-person.
Bill Pugliano/Getty Images
In Oregon, Jeffrey Cecchini almost got into a new Honda CR-V crossover SUV without visiting the dealership. In fact, his dealer was all set to deliver the vehicle to Cecchini’s home when the 37-year-old commercial insurance salesman offered to come by in person. He didn’t have to stay long.
“I signed a few things and drove away,” Cecchini said. “I think it’s going to change the sales process forever.”
That sort of interaction was rare before this year.
But when the coronavirus pandemic hit at the beginning of the year, dealers had to scramble as state governments in the US shut down in-person retail operations. (For the most part, they kept their service departments going, as they were deemed essential services. Emergency workers and medical professionals, after all, need their vehicles to run.) That meant going online.
“Dealers were very slow to embrace digital retailing before COVID, but the pandemic forced an evolution that was ready from a technical standpoint even as it was being avoided from a philosophical standpoint,” said Karl Brauer, executive analyst with iSeeCars.com.
“When the digital retailing option suddenly became the only retailing option, dealers rapidly embraced it, and I think most of them were surprised by how well it worked,” Brauer said. “Getting dealers to utilize digital retailing starts with an awareness that, yes it’s possible and, yes it can be a better option in certain circumstances.”
Back to the future
Amazon’s quick deliveries and seamless buying tools have changed shopping for a new generation.
John Keeble/Getty Images
There’s still some debate on how much the old ways might change, however.
“Our data shows that a majority of customers are still going to a dealership to buy a car,” said Jeremy Anspach, CEO of PureCars, an information and marketing-strategy resource for dealers.
That’s partly because these aren’t particularly risky places to visit. “Dealerships don’t have a high density of shoppers,” Anspach said. “And they’re taking the pandemic very seriously, following Centers for Disease Control guidelines, and spending big bucks cleaning, multiple times a day.”
The next few months could be an interesting test for just how much consumers could demand a new way to buy cars, while dealerships press for a return to a more-or-less “normal” approach, just with lots of face masks and hand sanitizer, and home deliveries of vehicles. (Test drives, long a reason for heading to the dealership, also came to customers’ driveways, with dealers dropping off sanitized vehicles.)
With the US market recovering more robustly than anticipated — another near-record year for sales probably isn’t in the cards, but a solid 16 million total for new cars and light trucks is — the fear now is that a spike in infections could send much of the country back into lockdown.
“If there’s one word to describe the US. automobile business, it might well be resilient,” Cox Automotive analysts argued in a recent summary of third-quarter sales data.
“From a pretty awful Q2, when much of the industry was closed and sales volume had dropped by an alarming amount, auto sales came roaring back in Q3 …. Auto dealers are feeling pretty confident about business moving forward.”
That suggests consumers might end up right back in the dealership, committing entire weekends to the task of getting a new family car.
A taste turns into a full meal
A new wave of lockdown could test the dealership model yet again.
Maybe not. After all, buyers have gotten a taste of hassle-free, online transactions, and automakers spent a decent amount of time during the first months of the outbreak promoting a different way to buy vehicles.
“A customer calls and says, ‘I want that Toyota Camry, but I don’t want to come to the dealership,’ and now the dealer doesn’t hang up,” Anspach said. “The consumer is going to demand a clean, swift, effortless transaction,” he added.
Brauer indicated that the taste could turn into more of a meal.
“Far more car buyers have experienced digital retailing today than had experienced it six months ago,” he said. “That means more demand for it from the consumer side, in addition to growing dealer awareness. Some percentage of those buyers will likely demand this retailing process going forward, meaning the genie is at least somewhat out of the bottle already.”
It could take a while, but buying cars could be on the verge of an overdue reinvention.
“The transition process took a big step in 2020,” Brauer said. “And with younger, Amazon-raised consumers moving into the car-buying age as older, traditional car buyers leave the market I see digital retailing becoming the dominant system over the next 10 years.”