Imagine for a moment getting through your holiday shopping without the ability to buy anything online. Hard to fathom, isn’t it? These days, you can order and pay for just about anything on your computer, tablet or phone—and sometimes get it delivered the same day! Buying a car online though? Not so fast.
We all know buying a car is a complex process. Buyers don’t always know what they want or what they can afford and often it takes a physical visit to the dealership to work through the variables and test drives to find the right fit. Then the actual purchase process starts from agreeing to terms, contracting, and F&I. Who could confidently want to do this online? A lot more people than you’d think.
Root & Associates was hired by CDK Global to conduct research to understand consumers’ desire to buy a car online. We surveyed 1,000 consumers who were planning on purchasing or leasing a new car within three months and presented them with realistic and detailed concepts around the purchase process to assess how much they want to conduct digital retailing verses purchasing in the dealership.
We found that 53% of consumers said they were “extremely” or “very” likely to conduct the entire car purchase online. This includes selecting a specific car, negotiating and arriving at a final agreed price, submitting their credit information and getting approved, reviewing final paperwork, and transacting—only going into the dealership to do a final review of the vehicle and drive off with the car.
We also learned that younger consumers signaled they are much more likely to buy a car online if the technology is available than older buyers. This is noteworthy because the desire to transact online will only grow as younger generations, who expect to buy everything online, age and make up a larger percentage of the car buying population.
So why do people want to buy a car online? Most cited reasons of efficiency and convenience. If the process can be transferred to an online environment, they see it as gaining efficiency and winning back time they don’t have to spend waiting around in the dealership. They also like the convenience of conducting most of the process on their own time and away from what is perceived as a high-pressure environment in the dealership.
So, if consumers want it, why isn’t digital retailing widely available today? Some argue the technology isn’t there yet. This isn’t true. Currently, the leading technology companies in the industry offer online transaction solutions for dealerships. Also, Silicon Valley Start-up Drive Motors, which is backed by Y-Combinator and Khosla Ventures, is also in market with their “Buy Now” offering.
We suspect the real reason these solutions are not more widely adopted is in a strong market, dealership management is reluctant to change. Implementing an online buying capability means significant process changes, training, and investment in the dealership. Dealers are fearful of losing control of a sales process that is steeped in tradition and highly managed—especially when they’re making money.
In a follow-up CDK study on this topic, we found that only 35% of dealership management said they were likely or very likely to offer a digital retailing solution on their website. Reasons cited included concerns over losing control of the sales process and not having the customer in person to sell to. Most interesting, however, was when dealership management were told that consumers were very interested in buying a car online, their perspective changed and interest increased to 53%.
Dealers and manufacturers should understand that consumers want to buy online today and the technology is available now. More importantly, car buyers are starting to expect that dealers will be able to transact online. Fifty-nine percent of car buyers said they expect to be able to buy a car online on a dealership website compared to 34% and 32%, respectively, on manufacturer and third-party website. This is good news and means consumers continue to see the dealer as the natural conduit to their new car.
And here’s the clincher: car buyers want this capability so much, 86% said they would choose a dealership with an online buying capability over one without.
Dealers looking for a way to tangibly differentiate themselves from the competition, here is your answer.
Dealership Executives - Interested in participating in research like this and get paid for it? Learn more about the joining the dealership research panel here.