Why Online Car Buying Is Stalling: Insights on Consumer Behavior

The Slow Shift to Online Car Buying

In the US, purchasing a car is second only to buying a home in terms of financial significance. With such a substantial investment at stake, it's understandable that many consumers approach the process with caution. A recent report highlights a surprising statistic: only 7% of new-car purchases are completed online, despite a push towards digital sales driven by automakers like Tesla and Rivian, and the influence of tech giants such as Amazon.

As Erin Lomax, VP of Consumer Marketing at Cox Automotive, points out, "People want to see, feel, and touch the car." This sentiment resonates with many buyers who prefer the tactile experience of test-driving and examining a vehicle before making a purchase.

“More than half of buyers conduct their purchases entirely in person.”

What the Data Shows

According to Cox Automotive, while 28% of buyers initially express a desire to complete the process online, only 7% ultimately follow through. This stark contrast indicates a gap between intention and action that deserves deeper examination.

• Over half of purchasers are completing transactions in person.
• Interestingly, over 50% of buyers prefer to physically sign documents rather than relying solely on digital signatures.
• A staggering 86% want to see the car in person before finalizing their decision.

Shifting Dynamics Post-Pandemic

The pandemic ushered in a wave of virtual transactions across many sectors, including auto sales. Platforms like Hertz have launched fully online car-buying solutions where customers can get prequalified for loans and arrange pickups without visiting a dealership in person. However, the multifaceted nature of the car-buying experience means that many consumers are still hesitant to embrace a fully online process.

Many buyers report appreciating the ability to conduct preliminary steps online—such as research and comparing vehicles. However, when it comes to finalizing financial arrangements, they often prefer the reassurance of face-to-face interaction. According to Lomax, “The steps relating to money and financing—that's where the anxiety comes in.”

Consumers Want Transparency and Control

As prices for new cars hover around $50,000, both buyers and sellers are searching for more efficient and transparent methods of transaction. A report from CDK Global found that “more profitable” online sales stem from reduced time spent by sales staff, indicating potential positives in shifting towards digital transactions.

Transparency is a crucial factor here. Customers often feel more empowered when they can compare prices and features online, leading to improved credibility for dealerships that embrace this model. According to Jessie Dosanjh, from the California Automotive Retailing Group, this shift allows better control of the sales process, meeting consumer demand for convenience.

“The internet bolsters transparency; customers can easily find prices and compare options.”

The Future Landscape of Car Buying

For the auto industry, the stakes go beyond immediate sales; they hinge on future relationships with customers. As businesses like Amazon Autos continue to innovate, they are bringing along traditional dealerships that are slowly adapting to changing consumer preferences. Whether through direct sales or partnerships with established platforms, the focus will likely remain on merging the convenience of online processes with the comfort of in-person interactions.

As we analyze the landscape of online car buying, it's evident that while technology is rapidly evolving, consumer trust and familiarity remain paramount. It raises important questions about how the industry will balance technological advancements with the innate human desire for connection and assurance in such a significant transaction.

Concluding Thoughts

The road ahead for car sales likely involves a hybrid model, integrating the efficiencies of online shopping with the personal touch consumers crave. With steady adjustments aligning the digital and physical aspects of purchasing vehicles, we may eventually find a sweet spot that meets the needs of a tech-savvy consumer base while retaining the essential elements of the traditional car-buying experience.