CAR buying is changing – fast. The days of traipsing around numerous bunting-clad forecourts, clutching a copy of the local paper’s car classified section are long gone.
The internet changed all that with the rise of online advertising portals and now it’s shaking up the car-buying process too.
Car manufacturers, dealers and specialist websites are all dipping their toes in the water of selling cars online. While no winning formula has yet been found, firms are offering consumers different ways to shell out for a new car on their phone or laptop from the comfort of their sofa.
But are buyers ready to enter their credit card details for a car and click ‘buy’? And, if they are, does that spell the end of the traditional car dealership?
A recent poll by DriveTribe.com suggests that more customers than ever before are ready to buy cars on the internet. Some 47% of 2,000 respondents in an online survey on our website said they were ready to shell out for a car online now.
In the States, where the car-buying landscape is arguably more advanced than in Europe, buyers are used to walking into a dealership and an hour later driving off in a new car. Forecourts there hold thousands of cars in stock, so buyers can choose a new one just as easily as a pair of new jeans.
This buying-from-stock model, rather than Europe’s factory-order format, lends itself far better to online car sales – and there are established web-based set-ups flourishing in the US.
Carvana is one of the biggest success stories. The online sales site sells used cars which buyers can have delivered to their homes or they can pick them up from one of 18 of the firm’s famous “car vending machines”. Last year it sold nearly 100,000 cars online – more than double the year before.
The firm blocks visitors to its website from outside the US, but hints that it would “love to sell cars to the rest of the world”.
Another US player is Vroom.com, which promises to sell used cars online “hassle- and haggle-free”. To give buyers peace of mind, the site offers a free history check and a free warranty, while finance can be applied for and approved online too. It currently offers more than 3,000 cars for sale.
Cargurus.com is an advertising portal that operates a hugely successful website in the States and is breaking into the UK. Its chief operating officer, Sam Zales, has been watching the online sales breakthroughs carefully.
He said: “Studies have revealed that 62 per cent of buyers would consider purchasing a used car online, but just four per cent currently do. There is clearly significant interest in the UK in a purely online car-buying process, but the small number completing a sale in this way shows there is work to be done by the industry to give consumers the tools they need to confidently complete an end-to-end online purchase.”
Car manufacturer Tesla has made a great success of selling cars online across the globe – but its tech-savvy customers are already used to buying big-ticket items on the web. Other manufacturers have had mixed success.
Mitsubishi UK launched an online sales service in 2017, but managing director Rob Lindley reported that of those customers who started their car-buying journey on its website, just six per cent bought online – the rest did a deal in a showroom.
Peugeot UK offers a similar experience on its website – and was one of the first to offer sales online. It’s been more successful, selling 3,000 online in 2018.
Meanwhile, over in Germany, Volkswagen has launched Hey.Car, an online used car platform that directly rivals the country’s established classified sites and promises to be 100 per cent advert free.
While many companies, including supermarket giant Tesco, have tried and failed to sell cars online, there are still many others queuing up to give it a go.
As established dealers and manufacturers dip their toes in the water across the world, it often takes a disruptor entering the market to tip things such as online car sales over the edge.
Serial entrepreneur Alex Chesterman, who set up house-hunting website Zoopla and made millions selling Lovefilm to Amazon, has raised £30m to launch a car-buying and rental website called Cazoo in the UK.
Although yet to be launched, it’s believed the platform will allow customers to buy, finance or rent a used car online and have it delivered to their door in 48 hours.
Chesterman said: “I'm excited by the opportunity to transform the used-car-buying experience, which suffers from poor satisfaction and convenience and is failing to meet the needs of consumers. Buying a car should be no different to buying any other product online today.”
It’s interesting that tech specialists have spotted what they believe is a gap in the market. How long, then, before the likes of Google or Amazon want a piece of the action too?
Dealers in the UK remain unconvinced about online sales. We asked bosses of two of the largest groups whether they thought online sales would ever eclipse those taking place in their showrooms.
“Not in my lifetime,” said John Tordoff, CEO of family-owned dealership group JCT600, the 11th biggest in the UK. “Although people are buying cars on our website, I think it’s a slow burn and it’s very much a generational thing.”
It was a view echoed by Daksh Gupta, boss of Marshall Motor Group, the seventh biggest in the UK.
“There will be a small percentage of customers who are not comfortable with the traditional sales process and will want to buy online because they don’t like the experience and want to make it easy,” he said. “Over time that might increase.”
GForces, a leading car dealer website builder, is investing heavily in systems for facilitating car sales online.
The firm is rolling out the software to its UK customers, with 100 dealers expected to be live by the end of the year. Bosses at the firm believe consumer demand is there – as the DriveTribe poll suggests – but that there are simply not enough retailers doing it yet.
Managing director Giles Smith said: “The tipping point has begun. Stats from Google and KPMG have indicated that there is growing demand from consumers to buy vehicles online, but the reality is that dealers have not had the means – until now.”
Some would suggest this slow uptake isn’t down to a lack of demand, but more to do with a reluctance to switch away from a tried-and-tested and, more importantly, heavily-invested-in retail set-up.
For decades, manufacturers have pressed franchisees into spending millions on gin palace showrooms to showcase their brands. To then tell them all that was all in vain and they now simply need some digital real estate wouldn’t be the easiest of conversations.
What may force the shift in online sales is new technology. When fully autonomous, electric cars become widespread, consumers may get used to ordering a car on an app to arrive at a time to suit them. The question then shifts to not if car buyers are ready to buy online, but if consumers will want to buy a car at all.
David Bailey, professor of business economics at Birmingham Business School, predicts this could be the real catalyst for change.
He told DriveTribe: “At the moment, people prefer to kick the tyres, go for a drive and shake hands on a deal, but that could change dramatically with a shift to consumers paying for mobility as a service.”