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The COVID-19 pandemic has shuttered car dealers’ showrooms nationwide and compelled automakers and dealerships to pursue online transactions.
The auto industry has experimented with no-dealership deals for years, but progress has been halting, even as some digitally savvy consumers ask why they can’t buy cars the same way they buy many other things.
Some consumers have discovered that an all-digital transaction is not only possible, but preferable.
But Jeremy Anspach, CEO of PureCars, an information resource for dealers, said that the traditional dealership model isn’t going to be wiped out by COVID-19, but it might be modified.
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Jeffery Cecchini is no stranger to buying and leasing cars.
The Oregon native has done, by his own account, 12 deals in 12 years. He is, in many ways, a dealer’s dream and nightmare. The 37-year-old commercial insurance salesman does homework on top of homework, knows his way around the financing process, and has purchased everything from SUVs to motor homes.
But Cecchini surprised even himself during the COVID-19 pandemic when he decided to buy a new 2020 Honda CR-V — and completed the entire transaction online. The only reason he visited the dealership was because he was in the mood; it had offered to deliver his vehicle to his home.
Cecchini’s odyssey began with Swickard Honda in Gladstone, Oregon, south of Portland. Or more accurately, the dealership’s website.
From there, Cecchini went with it.
“They did a good job of directing me down the path of buying online,” he said. “I was reluctant. I wanted to talk to a person.”
But the price on the CR-V crossover Cecchini wanted was right, and before he knew it, he was uploading his driver’s license, insurance information, and using a credit card to make a down payment.
“Congratulations,” the system said. “Your car is ready.”
A few minutes later, Cecchini got a call from the dealership, asking if he wanted to test drive the vehicle or have it delivered — that same day.
You’re the first person in the pandemic to go all the way through the process,” he was told.
“Why don’t I come see you?” Cecchini said, finally breaking the digital spell.
Overnight changes to the car-buying process
In a matter of months, the coronavirus crisis has brought car-buying to a place that the industry has grappled with for at least a decade. Consumers almost invariably start the journey with online research, and for some sites, this generated leads that can be sold to dealers.
Of course, both carmakers and dealers realize that a new generation of buyers are used to Amazon-style one-click purchasing. That’s great for buying everything from clothing to housewares, but because cars are usually financed — and because dealerships make their money on service and prefer to establish relationships with customers can be transformed into a lifetime of tune-ups and oil changes — dealers have made only tentative forays into all-digital transactions.
COVID-19 changed all that and changed it fast. With dealerships’ showrooms shut down by shelter-in-place directives in many states, the business scrambled to develop “touchless” protocols. Years of talk and halting experiments were replaced, literally overnight, with action.
“I signed a few things and drove away,” Cecchini’s said. “I think it’s going to change the sales process forever.”
Maybe. While the needle has moved, the traditional dealership probably isn’t going anywhere.
“Our data shows that a majority of customers are still going to a dealership to buy a car,” said Jeremy Anspach, CEO of PureCars, an information and marketing-strategy resource for dealers.
According to Anspach, while COVID-19 concerns might spark consumer concerns, dealerships aren’t particularly risky.
“Dealerships don’t have a high density of shoppers,” he said. “I personally wouldn’t feel more risk at a dealer. And they’re taking the pandemic very seriously, following Centers for Disease Control guidelines, and spending big bucks cleaning, multiple times a day.”
They don’t have a choice — and neither, in the grand scheme, does the US economy.
“Dealerships are essential,” Anspach said. “And the automobile has always been essential in America. It’s how our GDP is created. And in a pandemic, the vehicle becomes even more critical. Mass transit becomes scary and less valuable.”
He said the PureCars’ research indicates that driving is recovering, as the pandemic has slowed in parts of the US, but mass-transit usage remains down.
Change is coming, but the traditional dealership isn’t going anywhere
Stephanie Keith/Getty Images
With new-vehicle sales drastically reduced — the consumer auto site Edmunds.com calculated an annual sales pace drop to about 8 million units in April, a 53% year-over-year plunge and a much lower level than the nadir of the financial crisis in 2009-10 — automakers have pulled out all the money stops, offering 0% financing and extended loan terms through their captive lenders.
Some are also seeing the light when it comes to online sales.
“A customer calls and says, ‘I want that Toyota Camry, but I don’t want to come to the dealership,’ and now the dealer doesn’t hang up,” Anspach said.
“The consumer is going to demand a clean, swift, effortless transaction,” he added. A buyer could say that they want to test drive two cars that day, and the dealership will make it happen.
Savvy buyers like Cecchini could also take advantage of COVID-19 changes, he said. But they’re likely to be a minority. And direct-to-consumer sales, eliminating the dealer altogether, are a fantasy.
“A number of dealers are aggressively pursuing change, but the good old franchise dealership model remains,” Anspach said. “Franchise laws are quite strong, and they’ll remain for quite some time.”
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