Aaron Turpen: The traditional car dealership is dead; Consumers now have the advantage

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By Aaron Turpen
Cowboy State Daily Automotive Writer

For years we have seen the car dealership change as trends and technology have come and gone. But the traditional “walk in, kick the tires, sit down for the sales pitch, haggle and sign the papers” model hasn’t changed much on the consumer side.

Yes, electronic title deeds, easier access to loans, and other behind-the-scenes changes have come to speed the process, but the base down here for most consumers isn’t much different today than what it was in the 1960s.

But that is about to change. It’s not a question of if, but a question of when.

You’re here

The first indication that all was not well with the dealership model was when Tesla began attempting to sell cars directly to consumers and ran into state-imposed roadblocks.

These franchising and dealer territory laws, primarily designed as protectionist regimes for existing new car dealerships, showed that the status quo was so entrenched that it had become the law.

Trying to reverse this trend, Tesla skirted the laws by going to states that didn’t have them or those that had loopholes it could exploit to sell directly to consumers via delivery.

It has worked, up to a point, but is on shaky ground as dealer groups (often with the support of automakers) work to fill those gaps.

Yet Tesla’s efforts have had a result that even Elon Musk probably didn’t expect: consumers now know why they can’t buy a car on Amazon or get their cars directly from the manufacturer. Many had assumed that manufacturers “owned” the dealerships they sold to. This ignorance has been shattered for many.

Pandemic

Then came the pandemic. With the COVID lockdowns and resulting manufacturing slowdowns and logistical gluts, dealer lots have become nearly empty of new vehicles for sale. At the national level in 2021, almost a third of new car buyers bought their vehicle on order through a dealership and waited for it to be delivered.

Previously, this number was in single-digit percentages. Usually for options or special order models only. Now, even common vehicles like family crossovers and small pickup trucks are “out of stock” items that must be purchased on order rather than after flat tires and taking the traditional test drive.

The logistical slowdowns are expected to continue for some time as manufacturers scramble to fill backorders and suppliers work overtime in an attempt to supply them with parts and components.

Most industry players assume that we have at least another year or more of low dealer inventory. Which means even more consumers will buy without being seen through the checkout process. Probably well over half again this year.

tea leaves

What does this mean for the industry?

This means that the concession model is dying. Consumers may be getting used to not testing the exact model they want or tossing tires and fiddling with knobs and buttons while mulling over option packages.

Dealerships are adapting to this new model by streamlining their “online ordering” systems for both consumers and sellers.

Seeing these changes unfold, it’s easy to imagine a near future where dealerships no longer keep large parking lots of inventory to cover each model and their various trim levels.

Perhaps the dealership will only keep the traditional “middle” trim and highest trim on hand for consumers to touch and feel, but then fill most purchases through the order instead. .

Seller

The seller, who has become less and less important to the process as the Internet increasingly informs consumers of what is available, may in the future become more of an order handler and fulfiller.

We already know that the majority of new car buyers who come to a sales pitch already know what vehicle they want and don’t need to be convinced.

Salespeople were largely trained to guide potential buyers to an option that was physically available for purchase rather than what the buyer had in mind.

With the pandemic, this has become even more important to dealers for immediate sales, but consumers are clearly happy to resist this attempt and wait for an order instead.

Laws are unlikely to change to push dealerships out of their current semi-monopolistic role in vehicle sales.

Unless there is a concerted push by consumers and manufacturers to eliminate the middleman from the sales process (and its responsibilities), dealers can expect to continue to profit from their current status as the only avenue for sales. purchase of new vehicles. Which means the shady practices some are associated with will also continue. But, again, comes the power of the internet.

Watch dogs

Looking at new vehicle sales over the past few months, a clear trend emerges. Fan and consumer groups for the hottest models are all over the web and social media.

These groups now often have “watch” threads where consumers (and some insiders) post the amount of markup and the type of dubious fees that some dealerships add to most searched models.

A Ford Maverick forum, for example, has several participants photographing the ridiculous markups some dealerships put on this truck’s window stickers. On the other hand, Mazda CX-50 enthusiasts did the same for the dealership “fees” that come on top of it.

Even the usually bread-and-butter Chevrolet Equinox has a user group that tracks how long orders take to arrive after purchase at various dealerships in a few states.

Consumers are fighting back

Consumers follow this information and act accordingly. In one example, a person canceled an order for a vehicle at a dealership with high markups and drove 100 miles at another dealership with no markup instead.

In another example, a potential buyer walked out of a dealership that refused to remove the surcharge and drove 30 miles to another that had added no fees or markups. This use of technology gives consumers an edge and, as it grows in popularity, will begin to reduce the results of less scrupulous dealers.

Meanwhile, consumers who did a build-to-order for their vehicle found they could customize it in ways they hadn’t considered: like having unusual options and combo color packages. These consumers praise this personalization on social networks. Others take note.

We will eventually start to see the role of the dealer decrease in terms of the sales process and increase in terms of fulfillment. As more consumers become comfortable with the idea of ​​ordering and waiting for their vehicle, dealerships will have to adapt.

Manufacturers have already made it clear that days of 60 or more days of inventory on car lots are unlikely to return. Dealerships will have to adapt to selling online or face the certainty that manufacturers will start selling online themselves to keep up with consumer trends.

For consumers, all these changes will be a good thing, I think. They may take a while to happen, but they still happen.

Aaron Turpen is an automotive journalist living in Cheyenne, Wyoming. His background includes commercial transportation, IT, and many adventures that begin with the phrase “the law is a pretty good suggestion I guess.” His interest in automotive is focused on consumer interest and electronic and engineering technologies. Turpen is a longtime writer for Car Talk and New Atlas.


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