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In the automotive industry’s glory days of 1975-1997 (before the internet came and ruined everything for them), two major things were developed and maintained. 1) Customers were kept one or two steps behind, and 2) Dealerships made lots of money. These two developments were aided mostly by the salesperson and their managers’ abilities to control their customers.
This, more than anything else, is why the automotive industry is the last to jump on the “Buy it Online” bandwagon. From your home or office, the dealership has no control over you. For this reason, 99% of new and used car dealers with websites use their web presence for one reason: to get you to their lot.
From the safety of a computer, consumers are able to keep a separation that most car dealers do not like. They want people to not only be in front of them, but also in front of and inside the cars. It is much easier to make an emotional attachment to a vehicle that a customer is touching, smelling, seeing, and driving.
Most “old school” car dealers condemn the internet as destroying their business and turning the market against them. They recognize that the internet is a great and growing marketing tool, but they do not want to use it for a pure transaction. In their minds, “who buys cars on the Internet?”
The few who do offer ways to buy a car completely over the internet and via telephone are the ones who will eventually pave the way. The quality of cars, the length of warranties, and the information available to consumers are all increasing. With a bit of research, people are able to decide which vehicle fits them best without going from dealership to dealership test driving cars and collecting brochures.
A Bit of Research
New cars are simple to research. Sites like Kelley Blue Book and Edmunds offer a smorgasbord of reviews, photos, and pricing information. Search Google for the vehicle you are considering and literally millions of results beg to be clicked and read.
There are more reviews available on vehicles than there are on movies. Consumers can find virtual test drives, compare vehicles side-by-side, and even go through a “virtual test drive” that goes over every aspect of a new car before they leave their home.
New cars can very easily be purchased completely from home.
Used vehicles are a bit trickier, but it is still possible to get almost all of the information needed to make a decision. Classified automotive search sites like Kansas City Used Cars offer a diligent consumer can find their perfect vehicle.
The roadblock occurs at the intersection between the consumer and the dealer. They both lie to each other. Not all of them, of course, but enough to where the trust level between the two is just below Hillary and George W. and just above Syria and Israel. The dealerships started it with shady tactics and the consumers are fighting back with techniques taught by, yes, a barrage of websites dedicated to cutting the dealers’ bottom lines.
Breaking through Roadblocks
Nick Umbs, Internet Manager at Ted Britt Ford [http://www.tedbrittford.com/] in Virginia, has tried to bridge these gaps through eBay and other methods.
“We start out by posting 35-50 detailed photos along with a highly detailed description of the vehicle,” said Umbs. “We want the customer to feel like they are actually at the dealership with the vehicle. We don’t want them to have any unexpected surprises upon delivery.
“The whole process is very painless with great results.”
Using their prowess with eBay and an eAutoDrop option for consumers, they have been able to sell and ship vehicles around the country and across the world.
Another problem is with the trade-ins. While most dealer websites offer photos, a complete list of options, an available vehicle history report, and a promise that their used cars have been inspected and reconditioned by their service department, most consumers want to know their trade-in value based upon make, model, and miles.
Diffee Ford Lincoln Mercury in El Reno, OK, handles distant trade-ins as part of their Buy a Car Online process. Step 2 of their process has a page where the consumer can answer several questions regarding their vehicle and its condition. They are asked to send photos of their trade-in so that an accurate value can be placed on it.
“We have been able to sell dozens of vehicles to out-of-state customers because of 100% disclosure on both ends,” said Dandy O’Connor, Customer Resource Manager. “We don’t expect them to buy ours if it isn’t what we described, just as we wouldn’t take theirs if we were misled. Since we started the program, we haven’t had any of these deals go south.”
Their list of customers last month includes buyers from New York, Arizona, New Mexico, Texas, Kansas, Nebraska, Illinois, Arkansas and Florida.
Buying Online in Today’s Marketplace
The industry is reluctantly heading towards less face-to-face contact. Until it fully gets there, consumers can still buy their cars online – it just takes a lot more work.
First, they must find a dealership willing to deal with them in this manner. They may have to send inquiries to dozens of dealerships before they find one that doesn’t ask “When can you come in?” during every email and phone conversation.
Once an e-friendly dealership is identified, it is best to cut to the chase. Find the vehicle you want and make an offer. If there is a trade-in, your offer should include how much you want for it. Many websites advise people to “hide” their trade until they have worked out a price for the one they are buying. This is absolutely pointless and incredibly annoying to the dealership (so much so that it can actually hurt the final negotiated trade difference – this is explained below).
Online negotiations can be tedious. Emails can take time to be answered. In the meantime, the vehicle in question could sell. If possible, a consumer should initiate a phone conversation to discuss the money. The consumer should be prepared with information on both vehicles, including payoff on their trade-in.
While Edmunds and Kelley Blue Book are excellent for finding information about vehicles, their trade evaluators are usually inaccurate. Black Book is used by dealerships and offers realistic trade values.
Once both parties agree on a price or trade difference, payment can be arranged. Whether through online credit applications or simply having the dealership fax a buyer’s order to the consumer’s bank or credit union, it is not difficult to pay for a vehicle via internet, telephone, or mail.
Finally, arrange to have the vehicles and paperwork transported or set an appointment to finalize the deal at the dealership. If the paperwork is to be transported, the consumer will want to talk to the finance manager to discuss any warranties, fees, and insurance considerations before the paperwork is drawn up.
If the deal is to be consummated at the dealership, the consumer should still talk to the finance manager. They will want to talk face-to-face about other products. Let them talk to you about everything over the phone and ask them to have the paperwork drawn up before you get there. Finance is the last, best place for the dealership to make some money, so they will not do the paperwork ahead of time unless you ask.
The Truth About Trade-Ins
If a dealership whittles their price down, then learns of the trade, they will simply offer less for the trade than they would have prior to negotiations. Here is a realistic example:
If their car is listed at $20,000 and the trade-in’s actual cash value (ACV) is $5,000, the dealership might make an initial offer of $20,000 for theirs and $6,000 for the trade.
This is a necessary dealer “trick” because the vast majority of customers believe their trade is worth more than it really is. Dealerships can “show” more in the trade by decreasing their profit and run less of a risk of insulting their customer. After all is said and done, they are still counting the trade in as a $5,000 car.
Now, after some more negotiating, both parties might agree at $19,000 purchase price and $6,500 for the trade-in, yielding a trade difference of $12,500. In this case, the dealership most likely raised their ACV of the trade-in to $5,500 because they wanted to make the deal work and it was negotiated in good faith.
Given the same situation but where the consumer doesn’t mention the trade, the dealership might offer an initial $500 discount from the $20,000. Back-and-forth they negotiate and agree on an $18,000 selling price. Then the trade is brought in.
The dealership will still think the vehicle is worth $5,000 and will probably offer that much since they have no room “show” more money in the trade. Many dealerships might even offer a little less out of annoyance. Chances are very high that they will not budge from the $5,000 ACV, so negotiations end. The consumer can either take the $13,000 trade difference or not.
The Future
The ability to complete a vehicle transaction over the internet and telephone is slowly working its way towards fruition. The advantages are aplenty for both consumers and dealerships. It would broaden the options of consumers, decreasing the need to settle for a vehicle that isn’t exactly what they want. It would expand the potential customer base of dealerships by making distant buyers more accessible.
As of now, the consumers want it, but the dealerships are hesitant. They will all eventually break under the weight of necessity as more dealerships learn the lesson that “sometimes, it’s okay to lose control.”
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