Already caught off-guard by new-car leases not coming back like they used to, retailers are now facing pressure to try selling cars over the Internet
Would you buy a new car online? As malls hollow out and consumers change – or follow – the transition to buying nearly everything online, why not new cars? Hyundai in the U.S. is floating the idea by some of its dealers. Will buyers be interested?
It’s not exactly the fall of the Roman empire. But it might be an empirical decline of another sort, and the fallout could lead to changes that will forever alter the landscape of how we buy cars.
Generally speaking, laws have made sure consumers go through a dealer to purchase a vehicle. It’s why three dealers selling the same brand don’t set up shop next door to each other. Spread out the access, spread out the opportunity for sales.
Tesla of course, introduced the online-buying concept by working around the prevailing system, though it’s also installing bricks and mortar as it expands. But the automaker understood the future will be selling people cars they know they want via a system removed from the antiquated, top-heavy, clunky process often represented by traditional dealerships.
Prediction: it’s not if, it’s when. EV owners are already trumpeting the lack of maintenance required in comparison to ICE vehicles; traditional dealerships make their money in the back of the house, not the front.
The company’s pitching it as a sort of “preferred dealer” incentive, testing the waters to see who wants to bravely dive into new territory. It might be a catch-22 in some ways: get on board because it’s going to happen anyway, but risk getting cut out in the long run if you’re reduced to being a conduit in a pipeline you’re used to having far more control over.
We had fewer leased vehicles in 2021, so we have fewer people coming back in 2024, which means that in 2027, we still will not be back to normal—we’re losing a very loyal turnkey customer who moves from one lease to the next very fluidly
Tyson Jominy, vice president of data and analytics at J.D. Power
Online car sales aren’t new, of course. The beginning of the pandemic saw a surge of online retailers gobbling up every used car they could get their hands on and selling them to people who, at first, weren’t allowed to visit a dealership during shutdowns, and then liked the idea of completing the purchase in the same way they were already buying computers and socks. Delivered to your door, no intimidation, upselling easily skirted, and best of all, the introduction of a cooling-off period: try it for a week, and if you don’t like it, we’ll come take it back. Like all new enterprises, there have been casualties.
The convenience cost a premium for the service, but it was usually fair, and honestly, most consumers feel their wallets get bruised in a traditional car-buying transaction anyway. The lack of transparency and aggressive selling tactics employed by some traditional dealers soured buyers who were already being beat up by the highest prices in history. Consumers are more willing to try new things if safety nets are built in — did I mention the cooling-off period?
Dealers are also getting jittery about the predictable outcome of those arrested sales during the first few years of the pandemic: leased cars aren’t coming back. A large segment of car owners fuel the steady supply of newer used cars by turning their leases over every two or three years. It drives new-car sales, and fills up the feedbag on dealer’s lots with still-expensive but desirable used vehicles. The fact many of us with leases saw freakishly low residual rates also meant it was economically foolish to hand them back in.
In the original article about the Hyundai and Amazon partnership, dealers are understandably concerned about the loss of those lease returns. The president of the Virginia Automobile Dealers Association is quoted: “We don’t want to see this car sold off to outside folks who sell used cars online. It’s not a small point, it’s a big point.” Capturing those used cars is about to become a very big problem if physical dealership boundaries are reduced or erased.
The auto industry is entering its long-COVID years. While supply shortages defined the first half of the 2020s, the lingering impact will be a consumer base that finally starts to ignore the all-caps messaging about the latest and greatest, and finally pays attention to the fine print: modern vehicles are built to last far longer than previous generations, and smart owners will maintain and keep their vehicles instead of treating them like wedding attire.
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