For the average person, buying a car is a process wrought with unending frustration replete with all the drama of a daytime soap opera. Many people contend with Shakespearian levels of lies, deceit, fear, exploitation, and often make bad decisions under duress.
So how did things get this way? Should it be a rush to buy what for many people will be the second most expensive item of a lifetime?
One issue stems from the fact that until recently, the process of buying a car has remained largely the same since before the days when a 12oz soda was considered large. It is one of the few areas of modern transactional life where many costs are hidden and active negotiation is necessary to land a good deal. In the '50s, dealers thrived on lack of information about cars in the public domain. Today, many thrive on the lack of confidence and fluency in automotive and financial jargon.
There are of course exceptions to this rule. Many dealerships I have experienced are honest, efficient, well-intentioned and are proud to sell a good product at a fair price. Typically, this applies to new franchise dealerships, and more often than not, to the higher-end brands. When it comes to independent used dealerships, the average level of service, competency and knowledge generally takes quite a dip-with a few notable exceptions.
Typically, when it comes to used vehicles, there have been three different ways of acquiring them: You could buy one from a private party, from a new franchised dealer's used car lot, or from a stand lone used facility. The first two options generally can (but certainly not always) yield quality used cars, but as time has marched on, trusty Joe's used car lot down the block has remained in the stone age, and it's reached the point where these used vehicle lots have to adapt and or die.
We're facing a new world of automotive buying. Wages are stagnant, credit is still tight for those who don't consider Experian a friend, and a new wave of millennial buyers will be entering the marketplace. Many of these new buyers no longer associate vehicular freedom with the American dream and thus are clearer headed than ever about this one emotional decision, and while they are more price sensitive, they're also less willing than those before them to put up with the dealership tactics of yore. Combine these attributes with the fact that information is easier to acquire than ever, and you have a pool of informed buyers who refuse to play ball in the preverbal car buying game.
In order for independents to make it, they have to make some changes and they have to adapt quickly. Transparency needs to be embraced; there is a market for every vehicle and there's no reason not to be honest about the condition, ownership history, and status of the title. In the age of Amazon and Zappos, there is no excuse for not presenting products well and thoroughly. All vehicles need to be extensively photographed, paying special attention to any notable features or aspects of the car that will make it interesting to buyers. Most importantly of all however, there can't be any games.
If the aforementioned web giants have shown us anything, it's that customers are willing to pay a fair price for a great overall experience. Many independent dealerships thrive on false advertising. They'll show a car for an aggressive price and when it comes time to sign the papers, there's a documentation fee for $1,000, a $1,200 financing fee, a $300 prep fee, and a $500 delivery fee. This kind of practice is absolutely unacceptable and is the surest way of driving your business into the ground over the long term. It's absolutely vital that the price is the price. The only way to sell cars is to sell them as honestly and openly as possible. Ideally, they should be priced at a level where negotiation is unnecessary. There shouldn't be any games, and the transactions need to be quick and easy. There's no reason why it should take more than 45 minutes to buy a car.
The future of automotive retail starts with embracing the new, national market. Cars can and will are being shipped from coast to coast, bought and sold in a manner similar to any other online item. There's no reason that it has to be any other way, and those that adapt and embrace this new future of commerce are the ones who are already thriving.
One example of the changing market is Long Island Motorcars, a new dealership startup, which markets cars only online with zero tricks, and will now accept payment for a vehicle in Bitcoin. They use the conversion rate at the time of sale and accept the same exact price as cash; No games. Bitcoin can be a very interesting new way to sell vehicles, especially in international classic and specialty car markets, as well as in countries with more volatile local currencies. Bitcoin may be a bit more of a risk, but the opportunity cost of accepting a new currency is relatively low and it's a great way of differentiating yourself and entering a much less crowded new market place. Indeed, dealers may find that it make a lot of sense for to start embracing the new virtual currencies that have become a hot topic of todays headlines.
The future is here and it's a great time to buy and sell cars when it's done right. The recent changes have been so drastic that for the first time since the advent of the internal combustion engine, I have every confidence that car buying may one day soon be pleasurable, as the dealerships that can make that happen will be the only ones left to reap the rewards that can only come when you also let your customers win.