Car dealers bite the dust as the internet takes over

Monday 28 May 2012, 8:46AM
By Dog & Lemon Guide

The traditional car yard will soon be extinct, says the car review website

Editor Clive Matthew-Wilson says the internet has made conventional car yards unnecessary, and there are even bigger changes to come.

"Until recently, cars were often supplied to car yards by vehicle wholesalers, However, in an online world, the small car yard is largely irrelevant. The wholesaler can simply sell direct to the final customer without involving the car yard at all.”

"Large numbers of small car yards are already disappearing. They will be replaced by a few huge yards, with much of their stock sold direct to the customer online.”

“Private sellers are also muscling in on the car dealers’ traditional market. Private vehicles now make up about 60% of online sales. Because it’s easy to list a car online, private sellers have the same chance of a sale as dealers, but their vehicles are often cheaper.”

“The commercial car yards of the near future are likely to be giant warehouses that many customers will never physically visit. Instead, the customer will sit at home and be treated to multiple views of the car online, together with access to things like pre-purchase reports. Test drives, when they happen, will probably be on a small, private road out the back of the wholesaler.”

Matthew-Wilson believes that soon, only really expensive vehicles will be displayed in showrooms and only rich customers will be treated to long test drives.

“Given the high cost of retail space, glittering showrooms are going to go the way of the department store. There will always be a few wealthy car buyers who will be prepared to pay a premium price for premium service, but everyone else will simply be bargain hunting. It’s uneconomic to display bargains in a million dollar showroom.”

Matthew-Wilson says many buyers are now comfortable with purchasing a car that they have neither physically viewed nor driven.

“Often, vehicles are many kilometres from where you live. Provided the vehicle is what it’s claimed to be, it’s often better to buy a bargain in another town than to buy a more expensive vehicle close to home. However, you have to be very sure that the bargain actually is a bargain and that you allow for the high cost of transporting the vehicle to where you live.”

Matthew-Wilson adds:

“Even a local warehouse may soon be a thing of the past for new car buyers.  In the next few years, when you buy many brands of new cars, you’ll probably have the choice of making your order online with dozens or even hundreds of options, such as red upholstery or larger tyres. This order will then be dispatched automatically to the factory, and your custom-built car will arrive a few weeks or months later.”

“This system is not some future dream; it’s here-and-now technology. At present it’s mostly used for prestige cars, but soon, after a quick test drive at your local agent, you’ll probably be able to order your cheap Chinese-built car entirely online. You’ll pay a small deposit to the local agent, who will arrange finance, shipping, customs clearance, registration and delivery.”

“Although the local agent will probably be part of a very large operation, he won’t be a car dealer in the conventional sense. He’ll simply be a facilitator between thousands of customers and the factory. The customer will get a really cheap car, the agent will make money because he doesn’t have to keep many cars in stock.”

“There will always be people who will want to deal with a traditional car yard. However, most car buyers will opt for the cheapest option, and the cheapest option will be to buy online, even though they may never see the car before they buy it.”

However, Matthew-Wilson warns that buying online is still full of traps for the unwary.

“ You should never buy any vehicle from overseas unless you know what you’re doing. It’s a perfect way of losing all your money. It’s equally foolish to buy online locally without first getting a mechanical inspection and online data check. About 15% of cars sold online are bought by people who’ve never seen the car, never done an online data check and have never arranged to have the vehicle inspected. As a result, many people have been badly ripped off.”

“There’s no reason that buying online can’t be as straightforward and easy as buying from a traditional car yard. The rule is, unless you know who you’re dealing with and what the vehicle is like, don’t buy it. You should never walk onto a car yard and buy and unchecked vehicle. You should never buy an unchecked vehicle online, either.”

Some web facts:

•  Over 80% of car buyers now research online before purchase.

• Social media has become much more influential in vehicle buying decisions, especially among the young. Because most young people lack the specialist knowledge to chose between makes and models, they instead rely on social media. In a recent study of car buyers, 71% said they would be likely to purchase a vehicle from a particular car manufacturer or dealer if they found positive comments posted on social media sites. 51% said they would be less likely to buy a vehicle from a particular manufacturer or dealer who received negative comments.

• Customer service is still king when it comes to car dealers. Even though customers are likely to purchase a vehicle online, the level of after-sales service is a key factor in their next buying decision. About half of customers say they will buy their next car from a dealer that provides good service for their current vehicle.

• Interest in new cars is rising in many places. The flood of affordable new cars has made new cars more of an option for buyers who might previously have bought second hand.