Are Dealership Doomed? The Push for a Better Car Buying Experience
Revamping the Car Buying Experience
The traditional car buying process is failing today's consumers. According to a Beepi Inc. study, 87% of Americans express dissatisfaction with their experiences at car dealerships. Many feel pressured or taken advantage of, with a significant number preferring a root canal to negotiating with a dealer. This sentiment underscores a critical need for change in the automotive sales landscape.
Contrast this with a Perficient survey that showed that 96% of Tesla customers were satisfied with their purchasing experience since they were able to do scheduling, ordering, and financing via the app and then enjoy a stress-free visit to the dealer.
The Predicament of Dealerships
Despite living in an age of online purchasing, most car buyers still rely on walking into dealerships. However, prior to this, they engage in extensive online research, from checking car prices to assessing trade-in values. Autotrader reports that online platforms play a crucial role here, with 78% of consumers utilizing third-party sites.
The lack of price transparency is a major concern, with 84% of customers feeling dissatisfied with the opacity at dealerships. The buying process, especially in the finance and insurance (F&I) stage, is notoriously lengthy and opaque, involving an average of three hours of paperwork and unclear terms for additional services and warranties.
Connected Services Ignored
Connected car services are increasingly important, especially to younger and more digitally-focused consumers. Despite the increasing importance of these digital features, especially to younger, tech-savvy consumers, dealers often lack knowledge about connected car services or show little interest in discussing them during the sales process. This disconnect not only hinders potential sales but also deprives customers of fully understanding and appreciating the value these technologies can add to their vehicle ownership experience.
As the automotive industry continues to evolve towards more integrated digital solutions, dealerships must improve their expertise and enthusiasm in promoting connected services to meet consumer expectations and drive sales.
The Shift to Online Buying
The trend towards online purchasing is undeniable. A Progressive report shows that 78% of buyers who purchased cars online found the experience highly satisfying, in stark contrast to those who bought from dealerships and as mentioned earlier, 96% of surveyed Tesla customers were satisfied with their online experience.
A Cox Automotive survey reinforces this, indicating higher satisfaction rates with more financing steps completed online. Looking forward, 68% of consumers hope to conduct most or all of their vehicle purchasing online, with 80% viewing complete online purchases favorably.
Some of the resistance to an online purchasing experience is due a reluctance to disclose a price without negotiations, but the customer disdain of the process and miniscule profit margin is a high price to pay for the overall experience.
While F&I is a significant driver of profit, the Cox study found that consumers who researched F&I products ahead of time were more likely to buy them. Dealerships have discovered that they can sell more products during the F&I process by enabling the customer to choose which warranties and protection plans they want online.
The Role of OEM Apps
To align with consumer preferences, it's essential for automotive companies to enhance their mobile apps, transforming them complete engagement platforms beyond their current roles of basic vehicle control and status. Integrating the pre-sales and sales phases into the app gives customers what they want from the purchasing experience with the likelihood that they are more likely to spend more on F&I purchases.
If automakers fail to do this, others will step in to fill the void. The same OEM app that a customer will later download after their vehicle purchase could be expanded to allow customers to explore and configure vehicles, schedule test drives, view inventory, and engage with dealers throughout the purchase process. By integrating these features and providing a tighter integration with a local dealer, OEMs and dealers can create a seamless, efficient, and more satisfying buying and ownership experience.
Additional App-Based Opportunities
These apps can also facilitate real-time communication, present personalized offers, announce events, and help build a community among users. Given the low effectiveness of traditional email campaigns, leveraging apps for engagement can significantly enhance customer relationships and retention.
Parts, service, and body shop departments are a major revenue generator and an app should be the absolutely easiest way for a customer to buy replacement parts for their car or schedule service - offering greater convenience than other channels since there will be no need to enter vehicle information or wonder whether a component is the right one for the vehicle.
Embrace the Digital Revolution
The automotive industry must embrace this digital shift to remain competitive and meet the evolving expectations of consumers. By adopting a comprehensive digital strategy that incorporates the presales and sales phases via app-based tools, dealerships can offer a transparent, efficient, and enjoyable buying experience that seamlessly transitions to an ownership experience. This transformation not only caters to current consumer needs but also positions automotive brands as forward-thinking leaders in a rapidly changing market.
The future is clear. Dealership are not doomed but both dealers and OEMs need to evolve. They have to enhance their digital capabilities, engage with customers through the platforms they prefer, and streamline the car buying process.
About Sanboca Insights
At Sanboca Insights, we specialize in tackling challenges unique to the automotive industry, enhancing the journey from concept to deployment. We partner with leading automakers across the Americas, Europe, and Asia, where we deliver strategic guidance to refine technology roadmaps, accelerate development, forge partnerships, and unveil new opportunities.
Are you ready to lead the charge in redefining the automotive user experience? Contact us today to start your journey toward a more integrated and data-driven future.