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The pandemic has finally dragged car buying into the 21st century

It took a pandemic to drag the car-buying process into the 21st century — and consumers are never going back.

Why it matters: After COVID-19, consumers can now buy cars online as they do almost everything else, with the ability to complete the entire transaction digitally and take delivery without ever setting foot in a showroom.

The big picture: While most other commercial transactions — even banking — went digital years ago, car-buying remained a stubbornly low-tech, often aggravating, process.

  • But when the public health crisis paralyzed their industry, car dealers had little choice but to embrace the disruptive changes they'd been resisting for decades.
  • They scrambled to install new software that would let customers browse inventory, apply for credit and choose a payment schedule.
  • And they offered virtual test drives to demonstrate in-car technology and arranged "touchless" vehicle pickup and delivery.
"Consumers really like it. Surveys show they want more of it, and dealers are getting on board that this is how it's going to be."
Michelle Krebs, executive analyst at Cox Automotive.

The backstory: Technology entrepreneurs — and sometimes even carmakers themselves — have tried for years to modernize the car-buying process.

  • In the early 2000s, Ford even tried (unsuccessfully) to buy and operate dealerships in competition with its independently franchised dealers, thinking it could run them better.
  • Since then, newcomers have tried various digital retailing efforts, but none with any great success.
  • Car dealers, protected by state franchise laws, often were the biggest obstacles to change.
  • Tesla's direct-to-consumer sales model, for example, met fierce resistance from dealers in many states, requiring lengthy court battles or negotiated settlements with state governments, though Tesla eventually won.

For the record: Some progressive dealers have been exploring online sales initiatives for several years.

  • But many worried their profit margins would suffer if they weren't able to upsell buyers with extras like extended warranties or plush floor mats.
  • It turns out that dealers are more profitable than ever since shifting to online sales, Krebs noted.
  • "The deal happens faster because the consumer knows exactly what they want, and there's not a lot of haggling on the price," she said.
  • Yes, but: Prices are high also because inventories are limited due to COVID-related factory shutdowns earlier in the year.

The state of play: Dealers are now touting their "omnichannel" tech strategy to provide consumers a seamless buying experience whether they shop online, in store or both.

  • Nissan, for example, just launched a new online shopping platform called Nissan@home that lets prospective buyers schedule a test drive, sign the paperwork and arrange delivery of their new vehicle from their computer or mobile device.
  • Sonic Automotive, a large publicly traded dealer group, recently hired its first chief digital officer and vp of e-commerce with the goal of doubling its annual revenue by 2025.

The bottom line: A three or four-hour showroom visit can be compressed into a 15-minute online purchase.

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