98% of consumers want some aspect of car buying, shopping experience to happen online

by Jeff Della Rosa (JDellaRosa@nwabj.com) 272 views 

Consumers want to go online to complete some part of process to buy or shop for a vehicle, but whether they’ll be able to complete the process there remains to be seen. For now, the sales still take place at dealerships, not online.

“It doesn’t happen like that,” said Don Nelms, owner of Adventure Subaru in Fayetteville. “Final sales are done in store.”

At some point in the process, between 65% and 70% of people engage with the dealership via the internet, he said. Nelms also owns Sunrise Guitars in Fayetteville, and between 10% and 15% of its sales are completed via the internet. But he doesn’t expect to see buyers complete vehicle sales online.

“I don’t think it ever will,” he said. “It’s just not the same business model.”

Most consumers (98%) want to be able to do some part of the car shopping and buying process online, “suggesting that dealers should incorporate at least some aspect of digital retailing into their offerings,” according to customer survey by vehicle shopping website Autotrader. Between Jan. 26 and Feb. 2, Autotrader received 128 responses on digital retailing for the survey.

Consumers (86%) want to be able to take a 360-degree tour of a vehicle, reserve a vehicle for a test drive (59%) and negotiate online (57%), according to the survey. Also, 52% of consumers would apply for financing but only 30% would sign contracts online.

“The ability to sign contracts online is toward the bottom of the list, most likely driven by consumers’ security concerns around giving out personal information online,” according to Autotrader.

Stephanie Orman, dealer engagement manager for McLarty Daniel Automotive, said the issue with online buying is the paperwork, including determining a customer’s credit score and proof of income and providing the information to the bank. A lot of the dealership’s customers view its website, but they come to the store to make a purchase.

“They are definitely looking at us and checking online,” Orman said.

Completing a sale online is something a long ways away.

“It’s not just like buying a shirt online,” she said.

The majority of car purchases require financing of some kind, and this requires paperwork. So buyers aren’t likely to avoid the dealership anyway. Even if a buyer were to pay in cash, they’d still have to come pick up the vehicle. Also, if there was an issue with the vehicle after purchase, such as a recall, they’d need to return to the dealership to fix the problem, she said.

“Our goal is to always be your dealership for life,” Orman said, adding that remaining in touch with customers after a sale is important.

In May, McLarty Daniel gave away four new vehicles to students in the Rogers and Bentonville school districts as an incentive for perfect attendance. The dealership will offer the same promotion and give away four new vehicles at the end of this school year to students with perfect attendance, Orman said. It’s a nearly $150,000 promotion when taking in its total cost, including the new vehicles.

WHOLESALE PURCHASING
David Rath, general manager for Rath Auto Resources, said between 65% and 70% of its customers start off as internet shoppers, and about 40% to 55% of sales start as internet leads. Rath said the used car dealership, with locations in Springdale and Fort Smith, purchases as much as 50% of its vehicles via the internet.

“Even if we do physically attend the auction, we are able to look at everything online first to get a good idea of what to expect and what we want to try to purchase,” Rath said. “It makes it much simpler versus the old days when you had to just show up at the auction and walk around looking at what was available.”

“The auto auctions have created a pretty great network online that lets us shop much farther out than we would realistically be able to look if we were trying to physically send someone out to the auction,” he said. “We can buy nationwide, which lets us be more aggressive and find better deals than if we were restricted to where we could drive in a day.”

Nelms said his dealership has purchased wholesale vehicles online, but “it’s not real common.” It has sold some vehicles online through auction.

AUTOMOTIVE TRENDS
Wholesale used vehicle prices rose 2.6% in July, from the same month in 2016, according to Manheim. From June, the prices rose 0.75%, leading the Manheim Used Vehicle Value Index to 130.3, a record high for the third consecutive month.

“Wholesale market values continue to show strength despite concerns that increasing off-lease maturities would result in a used vehicle supply glut and rapidly declining used car values,” according to Manheim. “Instead, used vehicle sales are growing, driven by double-digit year-over-year growth in sales of vehicles less than four years old. Increased demand is absorbing the higher supply of newer vehicles.”

In July, new vehicle sales declined 7%, from the same month in 2016. So far this year, sales are down 3% from last year. Combined rental, commercial and government purchases of new vehicles have fallen 25% because of a 39% decrease of new sales into rental. New vehicle inventories fell to less than 4 million vehicles and are at the lowest level of the year.

Incentive spending rose 6.7%, the 28th consecutive month for increased spending, according to J.D. Power Valuation Services.

Retail used car sales fell 0.2% in July, from the same month in 2016, according to Cox Automotive. Franchised dealers saw sales growth of 0.5% in July, while independent dealers had sales fall 0.7%. So far this year, retail used car sales have risen 3.7%. Certified pre-owned sales declined 3% in July, but so far this year, they are up 0.6%.

In August, wholesale prices of vehicles up to eight years old are expected to fall 2.6%, according to J.D. Power Valuation Services. For the year, the prices are projected to decline 6.5%.

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