Will online dealerships replace physical car dealerships?

Interesting, Others | July 21st, 2015 by 10
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The used car buying landscape is changing dramatically. It’s no surprise really, as the current system of used car buying is broken. With current car …

The used car buying landscape is changing dramatically. It’s no surprise really, as the current system of used car buying is broken. With current car dealer’s ability to mark up prices, charge ridiculous hidden fees and consistently and intentionally fail to disclose certain important information, consumers are asking for a different way to buy. Carmax is a company that’s threatening to shake up the used car buying industry. But a new style of car buying is popping up and it’s entirely internet based.

A new app-based style of buying cars is starting to develop, with companies like Vroom, Beepi and Shift creating a new world of car buying while eliminating the need for car dealers. This may sound gimmicky to you, but it doesn’t sound gimmicky to large private investors who are putting millions of dollars into these ventures. Catteron, a private investor responsible for backing P.F. Chang’s, has just backed Vroom to the tune to $54 million. Beepi is on the cusp of closing a $300 million round of funding. Investors don’t put down that much dough unless they see long term success down the road.

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While each of these companies vary slightly, they all are in the game of creating an entirely new car buying experience. The idea is to give potential customers the ability to browse, research, schedule test drives and even buy cars all from a mobile app or their computers. Beepi and Vroom have set out to make buying a car as easy as a couple of taps on a mobile app, without ever having to step foot outside. While Shift has a service where it will have a concierge deliver the desired car to a place of the customer’s choice for a scheduled test drive, before buying. Neither Beepi or Vroom currently offer a test drive service, but they both have certified technicians who certify each car and give a detailed report on each car.

This might sound a bit nerve-wracking, buying a car with almost zero interaction with it beforehand. But it’s not all that different from going down to the dealer. Salespeople can be sharks, looking to make as much money on you as possible, as they make commission. So they can often times be less truthful than what you would see in the report on the vehicle from Beepi or Vroom.

I look at this like Uber. Cab fares are always ridiculously priced, because each cab company is different and can make up their own pricing and rules. But with Uber, the prices are set by Uber and can be checked using the smartphone app, so the price is acknowledged before getting in the car. You know you aren’t getting screwed. These new app-based car dealers are not much different. The prices are all determined by one company and the rules of selling to them and buying from them are equal. So, because everything is regulated, you’re much less likely to get screwed than if you were to buy from Jim Bob’s Kewl Kars car dealership.

Who knows if these new-age car buying companies will last and if they will really shake up the used car industry, but we do know that big investors see serious potential in them. We can only hope that these companies work out well, this way we can have an easier and hassle-free used car buying experience. No more dealing with used car salespeople.

[Source: WSJ]

10 responses to “Will online dealerships replace physical car dealerships?”

  1. Stephen Garrett says:

    I could go into the myriad of reasons why this won’t happen, but the short answer is- NO.

  2. Rob K says:

    Awful idea. There are zero positive reasons why these should exist. If you can’t leave your house in order to purchase a vehicle then don’t get a car; you won’t need it.
    You can get a good deal at a dealership. Do your research and walk in the doors knowing 1) what you want and 2) what you want to pay.
    Going to a dealership is one of the best parts of car buying. Please don’t take that away.

    • Billy The Hillbilly says:

      Even though I agree on the dealership part, I find your post quite arrogant. There’s actually huge number of people who just won’t care, because they are NOT interested in cars and they

      a) don’t undestand anything about it except which fuel they have to pour in to make the engine work
      b) can’t be bothered, don’t want to pay attention to it. Just want to choose some car they like and be done with it.
      yadda yadda…

      The thing is – not everyone is buying an M1, not everyone is a car enthusiast or even a person with any technical awareness whatsoever. But they also need to commute. For those, I imagine, should such service work really fine. It might not depend just on their ability of getting their asses off the couch, yo kno?

      • Rob K says:

        If these “huge numbers” of people can’t spend time researching a product that is typically the second largest purchase people make then they will also get ‘taken’ while purchasing online.

        Using a set price online allows for greater manipulation of buyers because it removes competition between dealerships. It removes the human element of the salesperson thinking “what do I have to do so that I can make this deal?” The author made an argument that online sales will prevent people from being taken advantage of. It won’t.

        You don’t need to be a car enthusiast. You don’t need to be technical. I said you need to know what you want and what you’re willing to pay.

        • Billy The Hillbilly says:

          The author made an argument that online sales will prevent people from being taken advantage of. It will. Especially if “doing research” means knowing what you want (e60 530d) and what you’re willing to pay (11k). Doing your researches like this means this service has a huge potential to come in handy for you as well ;-). The cool part is this is not a research, but most ppl won’t bother with finding out anything more. And that is my point and the article works with such prediction as well.

    • Daniel says:

      “Do your research and walk in the doors knowing 1) what you want and 2) what you want to pay.”
      If you already know what you want and how much you are ready to pay, what exactly is the purpose of going to the dealership?

  3. Mike Vella says:

    I hope the traditional dealership experience goes away, replaced with something of a hybrid, approaching what Tesla does.
    Already with the internet, I can go online and search for any car I want, new or used for price and options.
    Cars not priced correctly will not be sold as fast. Branches of particular brands make all their money off service and up-selling. On the former, that’s always needed, on the latter they’ll have to figure out another way to talk people into buying some horseshit poly-coat something or other to make a buck.

  4. Autoreduc says:

    We fully agree with this article. In Europe, we have been the pioneers in bringing price transparency and comfort in car buying and selling. Our business model is very similar to Beepi’s but we sell also brand new cars, at the best price, thanks to our unique group-buying concept.

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