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]

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