Car dealerships are outdated and people hate the current car-buying process. It’s a cumbersome and time-consuming endeavor in a world that’s dominated by sleek digital interfaces and friction-free application processes. The outdated dealership experience is changing slowly, but in most cases, dealerships are still stuck in the dark ages. Most haven’t modernized, and many cling to practices that will die with the Baby Boomers. Here’s a closer look at the situation.
For a Long Time, There Were Basically No Alternatives
For decades, the car-buying process was the same. You went to the dealership, talked with a salesperson, test drove a car, jumped through a lot of hoops at the financing stage, and drove off in a new car. Sometimes, buyers would special-order a car while at the dealership instead of picking one off the lot. This whole process took hours, and if you were going to seriously go car-shopping you had to block off a big portion of your day to make that happen.
Why did people put up with it? There were really no other options. Short of going private sale, there were few other ways of buying a car. With the internet came a major shift, one that’s still developing today. There are now online options for car research, buying, and selling. You don’t have to do much at the dealership, and many people want to spend as little time there as possible. Dealers have streamlined their process to make things go quicker, but Car and Driver reported that the industry average is still four-hours. That is simply too long for many buyers.
Modern consumers are used to an online buying process, and that's what dealers need to try to create. Time published an article that noted three-quarters of buyers would consider doing the entire car-buying process online. Now, there are options to do that, and this leaves the typical car dealership in the dust.
People are Used to the Classic Dealership Experience
One reason that many car dealers still haven’t modernized and supported an online solution is that people are slow to change. While many people research cars online, most still go to the dealership to make the final purchase. The car-buying process is so ingrained in buyers, that most are a little scared to do anything else. This was especially true when online car-buying was in its infancy, but it is still true today.
The company Carvana allows you to do the entire car-buying process online. This streamlined approach to making a car purchase would seem to appeal to two-thirds of car buyers, but the company is currently struggling. We recently reported that Carvana saw a disappointing fourth quarter. Its stock has plummeted, but expectations for the long-term outcome are still pretty high. This is a new way of buying a car, and it will take some time to catch on. When it does, dealerships operating on the classic business model need to watch out.
Many Dealers Need to Modernize
We’re not saying that car dealerships need to disappear. Many people like being able to go to a dealership to do a test drive. In fact, Car and Driver reported data from a McKinsey & Company study that showed 80 percent of buyers take test drives. We strongly encourage people to test-drive cars before they buy. The dealership is a good place to do that, but it shouldn't be the only option.
Car dealers should offer listings online, and they should allow for potential buyers to request a test drive where a salesperson can drive the car out to their house. This eliminates the need for the buyer to have to come in to get an idea as to whether or not they really want to buy the car.
Also, Car and Driver reported Autotrader data, which showed that three-quarters of buyers wanted to do the credit and financing paperwork all online. That means car dealers should have an online portal for this, too. This would further reduce the number of things that needed to be done at the dealership, and it would reduce the amount of time spent there.
In short, dealerships need to reduce friction in the car-buying process and eliminate pain points for their customers. They’ve been able to get away with it for a long time because there weren’t many options. Now, with new online car selling companies popping up, ideas for how to fix customer issues through the internet have started to take shape. If a dealership hasn't begun addressing the future of car buying, it may want to start thinking about it soon or risk being left behind.