Some vehicle owners are ready to purchase their next car online, according to a recent survey, but don’t expect online car buying to soon catch on at buy here, pay here dealerships.
More than 20% of vehicle owners want to buy their next vehicle online, instead of going to a dealership, according to an Autolist.com survey. And for vehicle owners who most recently purchased a used vehicle, 22% of them would shop online instead of the dealer, said Alex Klein, vice president of data science for Autolist.com.
“I think the data points to this phenomenon being just as powerful, if not slightly more powerful, among used car buyers,” Klein said.
Bentonville-based America’s Car-Mart doesn’t expect online car buying will impact the company because its business happens at the dealership. Staff of the buy here, pay here auto company meet with prospective buyers and get to know them and their situation before moving forward with the purchase.
“We consider ourselves a small-town character lender,” said Jeffrey Williams, president and chief financial officer for Car-Mart. “It really requires a handshake and a meeting. There’s a real high-touch personal side to our business.”
Nearly all of Car-Mart’s customers have deep-subprime credit scores, or a score of less than 550, and the company provides financing for customers to buy their vehicles. The financing is an important part of the transaction for Car-Mart, Williams said. And while customers of the company cannot complete a vehicle purchase online, “they can start the application online,” Williams said. The company’s website collects basic contact information from prospective buyers allowing for follow up phone calls.
When asked if the company would offer online car buying, he said it’s not been something about which customers have asked, and he’s not heard complaints of customers who would like to speed up the buying process. Online car buying might have more potential for markets “higher up the credit spectrum,” Williams said.
Other data in the Autolist.com survey shows 43% of respondents said the best part of visiting a dealership is test driving a vehicle, followed by the 25% who liked the large selection of vehicles. But 48% of respondents said the worst part about going to a dealer is negotiating the price, followed by the 42% who said speaking to a salesperson was the worst part. Also, 42% are most afraid of “getting ripped off” when buying through a dealer.
Respondents were most satisfied with dealerships of American car manufacturers, according to Autolist.com. They were ranked in three out of the five top spots; however, “international automakers, by contrast, sometimes struggle to satisfy.” GMC was No. 1; Cadillac, No. 2; and Chevrolet, No. 5. The bottom five, included Acura, Hyundai, BMW and Kia.
The Manheim Used Vehicle Value Index rose 1.3% to 124.1 in March, from the same month in 2016, but the index fell 0.5%, from February. Used vehicle values have fallen in the past five of six months, but “it has not been the collapse that many analysts have warned of for more than a year due to increasing wholesale supplies,” according to Manheim. The weak values are likely a result of “excessive new vehicle inventory, not used.”
In 2017, used vehicles values are expected to decline in the mid-single digits or less “as downside is limited by strong consumer demand, continued mix shift to (certified pre-owned) and late model vehicles, and declining new vehicle affordability,” according to auto market analysts Bret Jordan and David Kelley, both of Jefferies.
The retail used vehicle market “remains healthy, and dealers have needed only a modest decline in auction pricing to maintain acceptable inventory turn rates,” according to Manheim. But new vehicle sales have put pressure on used car prices. In March, new car dealers offered just as many incentives as in February, but sales declined 13% in March, from February. “Last month’s weak sales pace, plus less-than-needed production cuts, has left dealers with still too much new metal on the ground.”
However, retail sales of used vehicles continues to rise. “In the first two months of 2017, total used vehicle retail sales were up 5%, with franchised dealer sales up 6% and independent sales up 7%,” according to NADA.
The sales growth continued into March, according to Manheim.
Shares of Car-Mart (NASDAQ: CRMT) closed Tuesday at $36, up 60 cents. In the past 52 weeks, the stock has traded between $47.75 and $19.49.