Coronavirus Is Pushing Car Dealerships Into Online Sales and Home Delivery
As foot traffic dries up, the nation's dealer showroom culture is undergoing a forced evolution
As the coronavirus pandemic intensified this year, foot traffic at the Honda of Hollywood dealership in Los Angeles dried up quickly.
To try to keep some business flowing, the dealership started advertising online transactions and free home deliveries that would respect social distancing, says Roland Perez, digital marketing director for Bakhtiari Auto Group, which owns the dealership and others in Southern California and the San Francisco Bay Area.
Dealership visits are now by appointment only, he says.
“Consumers are scared to come in, and you can’t blame them,” says Perez, who estimates that 60 percent of Bakhtiari’s employees across California have been laid off. “I think this has opened the eyes of the dealership world that you basically need to be able to do 100 percent of your transactions online.”
“A lot of dealerships across the U.S. are understanding that this is the way we're going to have to do things moving forward,” he says.
Auto sales were strong this year until the novel coronavirus and social distancing cut deeply into traditional face-to-face transactions. Dealerships large and small have responded by ramping up their online sales capabilities and offering home delivery options, among other approaches designed to keep consumers comfortable with buying cars.
Car Sales Future Is Now
Online car sales have traditionally made up 10 to 15 percent of the total U.S. vehicle market, according to Autopia, a company that helps consumers lease cars online. It’s unclear how much the percentage has increased in the several months since the onset in the U.S. of the coronavirus pandemic. Dealerships and online sales experts tell CR that “contactless” car sales strategies are increasing and evolving rapidly as new car dealerships learn quickly how to do it.
No one knows what the post-pandemic future will look like, but based on CR’s conversations with dealers and trade groups, consumers can, for the most part, expect to be able to buy cars like they buy a lot of other things—with their smartphones and tablets.
“I think there will be a lot more of it after this whole thing blows over,” says Jason Courter, chairperson of the American International Automobile Dealers Association and chief operating officer at Honda Auto Center in the Seattle area. He says current franchise rules and state regulations can—at present—make contactless sales tricky, sometimes because of in-person signature requirements. But he says dealers are already talking about how the sales landscape will change as a result of current coronavirus-induced tumult.
“Dealers are resourceful,” he says, “and they’ll figure out what’s going to work best in the market.”
During a typical online car sale, a consumer would peruse the online inventory, choose a car, perhaps select additional options, and then get approved for financing, or buy the car outright. The car could then be delivered to the consumer’s home, either on a flatbed truck or by a pair of drivers and a follow car. Depending on local laws, the paperwork could be signed electronically over the internet, or outside in your driveway. The idea is to make the transaction contactless, or almost contactless.
Consumers interested in a “contactless” transaction need to do online and telephone research to see which dealers are offering the online sales and home delivery options. Shoppers also might need to feel comfortable with buying a car without first kicking the tires or test-driving multiple models. Some dealerships arrange for an at-home test drive as part of the process.
However you buy a car—with or without a test drive—be sure to clean its surfaces, inside and out. Many dealership websites now include a list of precautions that sales and service staff are taking to make sure customers’ vehicles don’t become contaminated.
At independent All American Motors in Tacoma, Wash., customers now have the option of free home delivery, says Brandon Clifton, a dealer principal with the used-car business. He says All American uses technology that allows customers to walk around a car virtually through video chat and to gather as much information as possible without setting foot in the dealership. Financing, registration, and all the other documentation can be handled online, and any document requiring an in-person signature can be sent through express mail, he says.
“It was already moving in that direction,” Clifton says of the broader market. “This is just going to accelerate that.”
Even in normal times, Consumer Reports recommends that shoppers research cars and various option packages online before contacting a dealership, says Gabriel Shenhar, associate director of CR’s auto test program. Shoppers should feel empowered to take the initiative in this process, identifying the exact car they want in their own time frame, including negotiating a price or lease deal over the phone or through email, he says. This strategy not only lessens the time exposed to any sales pressure but also maximizes social distancing. Physically going to the dealership might only involve a test drive and the signing of final papers, he adds.
If you don’t have a deal worked out ahead of time, you still should arrive at a dealership with a model preference in mind. CR members can research our detailed ratings and reviews at CR.org/cars to find the best match that meets their needs. Become a Consumer Reports member.
Niche Business Model Taking Off
Some auto sales companies have been selling or leasing cars online for years. Tesla, in a long-running battle with various states over their dealership laws, conducts sales online and delivers purchased cars directly to buyers.
Carvana, a national used-car sales company, connects online used car shoppers with available vehicles. Once a deal is reached with an online salesperson, the buyer signs documents by mail and can receive delivery of the vehicle at their home.
Autopia allows consumers to search lease deals by entering preferred criteria. The company then sets up financing and arranges delivery of the vehicle. Assuming the buyer qualifies for financing, the transaction doesn’t take much time and the vehicle shows up at their house.
“The universal feedback we get is, ‘I’ll never set foot in a dealership again,’” says Rod Eldibs, Autopia’s CEO. “It’s 5 minutes of signing paperwork and you’re on your way, vs. visiting the dealership, which can take a while.”
To be sure, dealerships, generally speaking, prefer to have potential buyers physically at their location—test-driving multiple vehicles and considering option packages and higher trim levels. Also, some consumers might insist on browsing the inventory at a dealership so that they can test-drive multiple vehicles before making a decision.
Even so, online sales have become a way to minimize human contact, and in states that have closed showrooms, they present an avenue for dealerships to shore up sales that have dropped precipitously in recent months. No matter how you calculate it, year over year, or month over month, double-digit drops in sales have been the norm in recent months, and they’re expected to worsen as “stay at home” orders spread through the nation.
Some Dealers Ahead of Others
Prior to the pandemic, some dealers already were in the process of increasing online sales, with third-party software service companies, such as Roadster and 321ignition. The companies specialize in setting up digital platforms so that customers can view dealer inventory, select options, set up financing, and arrange pickup or delivery of the vehicle. Some dealerships arrange for test drives at a shopper’s home.
“If you look back precoronavirus, you probably had 20 percent or less of dealerships that were offering online transactions,” says Michelle Denogean, chief marketing officer at Roadster. “It was evolving, but the pandemic threw us five years into the future in about five days.
TrueCar, a major online automotive marketplace, is developing a Buy From Home program that allows consumers to handle all aspects of a car purchase without going to a dealership. About 30 percent of the TrueCar network of more than 16,500 dealers are participating, with more expected to take part. Dealers with the Buy From Home option are identified by a special logo in car searches on the website.
This extensive dealership network can be accessed through Consumer Reports Build & Buy program, a car buying service that allows shoppers to configure the car they want, compare local transaction prices, and have participating dealers provide their best offer.
Showroom Future Uncertain
As the world changes, many dealers face the challenge of pivoting from their longstanding commitment to getting people into the dealership to touch cars and interact with seasoned salespeople. The emphasis on this showroom strategy has delayed most dealers from building effective online sales and marketing presentations, especially those that work well on mobile devices.
The result has tended to be websites, where they exist, that can be confusing or awkward to navigate. Consumers don’t have much patience for that and are more likely to leave a website—or “bounce,” as the internet search industry terms it—if a shopper can’t easily interface with the dealership site.
“Google and Facebook are mobile-first platforms, and a lot of companies are advertising on there,” says Lyamen Savy, CEO and founder of 321ignition. “But Google and Facebook penalize businesses that have a high bounce rate, and it affects where they come up in a search.”
These are problems many dealerships will have to work through as the coronavirus slump continues. Those that already had online commerce running have an advantage over those who haven’t, says Denogean, because they’ve already worked out a lot of the kinks endemic to a new process.
During this time, it’s a good idea for shoppers to monitor dealership and manufacturer websites to stay on top of special deals and incentives. TrueCar has an online tool that makes this easier.
Eric Lyman, a vice president for ALG TrueCar, says that regardless of whether online sales and free delivery are available in a few months, people who might need a car soon should take advantage of any extra downtime they might have now to do their homework.
“You can do your research now and be extremely productive with your car buying journey,” Lyman says. “There are a lot of online resources you can take advantage of.”