How Dealers Are Adapting To "Online-Only" Car Shoppers
A growing number of car buyers are finding great deals by shopping solely on the Internet
People who sell cars in the U.S. agree that there's a demand for online sales, especially among the so-called "Millennial" generation -- folks born in 1980 and later, and who grew up with connected computers. Research company R.L. Polk says these buyers account for about 10 percent of the total 15 million new passenger vehicles sold each year. That percentage is growing.
"A lot more people do a lot more research than just four years ago," said Tom Cockfield, the Internet sales manager for Ann Arbor Automotive, a multi-franchise new car dealer outside of Detroit. "Ten years ago, shoppers came into the dealerships to do research. Today, they already know the market and the car they want. All of that is because of the Internet."
Computer-savvy buyers want to take the car-buying process as far as they can online before coming into a dealership to test drive a car. Because of this, dealers have been offering online-only sale prices for cars, sometimes discounted up to $1,000, according to dealers.
However, while this helps get people in a car in the short-term, dealers have reported a loss in their ability to create long-term customer relationships, and fewer opportunities to sell maintenance and extended warranty contracts. "One day it'll be like a Best Buy. People will help you, but not know much about what they're doing," Cockfield said.
In spite of this, dealerships are increasing dedicated Internet-only sales staffs, who often advertise more competitive prices online than in the showroom. Internet staffs are also assigned the task of searching for cars that are not physically on the dealership's lot, which offer the Internet shopper more variety in optional equipment and price.
As a result, things have changed at auto dealers, from simple things such as giving away fewer brochures since potential customers can see these online, to a dramatic shift in following-up contacts with customers who walk into a dealership. Prior to the Internet, salesmen would immediately call customers a day after they appeared physically at a dealership, believing that they were ready to buy a car. Today they realize that the average time between a walk-in and closing a sale is about 45 days, said Dave Overlander, a financing expert at one Detroit-area new car dealer.
"A lot of buyers start with Facebook," added Cockfield. "They don't look at the ads for new cars, but they are excited by the social contact."
Facebook users post images of their potential new cars to their friends, and they look for what other friends have bought and how happy they are with their cars. More customers are using mobile and tablet computers, and so manufacturers are developing Internet sites that make this use easier.
Large car-buying sites such as AutoTrader.com, CarMax.com or AOL Autos make it easy for the buyer to find the exact model and equipment they want, and then send them to multiple dealers to compare prices. Cockfield reported they typically deliver to these buyers up to 100 miles away -- even to buyers who have never even been to his showrooms.
Considering how much money you're spending, you should still visit a dealership in order to test drive a new vehicle since it's virtually impossible to tell if a car is a good fit for you without getting behind the wheel. Plus, if you have a used vehicle trade-in, the dealership will need to inspect this vehicle before the sale is complete.
Still, the rise of Internet car buying is generally great news for consumers, as it may spell the end of traditional haggling: "There is less negotiation in Internet sales," said Cockfield. "When we sell a car through the Internet, we don't have much mark-up."
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