Millennial car buyers flock to the market, happy to flee showrooms


Contrary to popular belief, millennials don’t hate cars. They hate car dealerships.

But the pandemic drove car dealerships to ramp up their online sales, eliminating what millennials (and others) dreaded: showroom visits that averaged five hours, haggling, paperwork, and money. high-pressure arguments for complementary products such as wheel and tire insurance.

“I don’t like the car dealers’ laugh of ‘Let me talk to my manager’ and ‘Let’s move on to the finance department’,” said Will Clark, 38, a recent car buyer who lives in a suburb of Portland, Oregon. “I don’t understand everything: ‘You have to take it for a ride, kick the tires!’ It was a model back when cars didn’t have the same quality as they do today in all the domains.

It was assumed that Millennials disliked cars because, thanks to alternatives like Uber, Lyft, and helicopter parents, they often delayed getting a driver’s license. Financially strained by school loans, tough job markets (the Great Recession and the pandemic that just ended) and an average cost of a new vehicle of $ 38,000, they delayed buying a car. even longer.

But in 2020, millennials bought more new cars than any other age group, accounting for 32% of total new car sales, edging out baby boomers for the first time, according to market research firm JD Power. And those millennials were almost twice as likely as baby boomers to shop and purchase a vehicle – new or used – entirely online, according to Cars.com, which equips dealers with technology for online sales.

Millennial financial weight, contempt for dealerships and the pandemic have converged to change the way cars are sold, which may benefit car buyers and dealerships beyond the pandemic.

The transition makes it a vibrant market for online car shopping services and software platforms, such as Cars.com, which went public in 2017; Change and Vroom, both of which became public last year; and Carvana, whose share has gained more than 200% since March 2020. Many other services are emerging, such as Co-pilot, Gettacar, CarBevy, Car saver, and Joydrive, some of which are backed by large venture capitalists.

Even with the growing number of services, there is ample room for growth, said Toby Russell, co-managing director of Shift, which sells used cars.

“The used car market in the United States alone is worth around $ 840 billion,” he said, adding that less than 1% of those sales go through the top three online dealers listed in Canada. stock exchange, which created a collegial rivalry.

“It’s not Shift, Vroom and Carvana against each other,” he said. “It’s Shift, Vroom and Carvana against the other 99% of the market.” The new car market is estimated to be one third or less of the used market.

Used car applications outnumber new car services as they face fewer legal restrictions. These restrictions, from the mid-1950s, protected dealers, said Daniel A. Crane, professor of law at the University of Michigan. Before regulation, automakers could force family dealerships to take cars they didn’t want by threatening to open a competing showroom and cut prices.

The dealer regulation was challenged by Tesla, which Mr Crane advised informally. Tesla circumvented the regulations by owning all of its dealerships. This allows her to sell cars directly online and in her stores as there are no moms to threaten. In states where he could not sell direct at all, such as Michigan, his customers would take delivery in a neighboring state. Tesla did not respond to a request for comment.

More established manufacturers face tougher barriers to online sales. Dealers can sell online, but manufacturers cannot. Individual dealers often license their own software platforms, and the resulting websites work and look similar to each other, even within the same brand, which may not be good for brands.

General Motors has taken steps to standardize dealer sites with its “Shop.” Click on. Drive, ”introduced in 2013. It inspired headlines such as“ GM ‘Shop-Click-Drive’ Can Eliminate Showroom Visits ”in USA Today. It hasn’t achieved this lofty ambition, but GM may be getting closer to what the industry calls an “end-to-end” transaction.

It’s the holy grail of online car selling, encompassing shopping, buying, offering incentives, trade management, financing, and insurance selling in one fully online transaction.

“We’re very close to doing it,” said Amrit Mehta, who leads GM’s global web efforts. GM will unveil a new site for its Bolt electric cars, which will be Chevrolet’s most advanced online sales site, he said. “We are seeing that customers who buy electric vehicles are embracing new ways of buying, and this is where we see the greatest opportunity.”

Nissan is refining an online sales system, Nissan @ Home, based on a platform licensed from CarSaver, which was developed for Walmart. “It’s clear that the younger generations want to do more online, and Gen Z even more than millennials,” said Dan Mohnke, vice president of e-commerce at Nissan. “We use it to differentiate the Nissan brand.”

But even individual GM and Nissan locations can work differently from dealership to dealership due to different state laws and because their dealerships can choose which parts from the online toolkit to use. Some resellers with a run-down sales culture may use websites just to get buyers into a showroom.

“Some dealers get it; some may cling even more to the past, ”said Mohnke.

It is an overstatement to say that a current platform is truly end-to-end. For one thing, many states require a “wet signature” on sales contracts, that is, a physical signature. But different platforms have refined different parts of the sales experience to meet the expectations of younger generations.

The test drive – which made dealerships a must-have – has been replaced by what you might call trial ownership: a trial period with easy returns. Carvana’s return policy has wowed Jessica Minnen, who is 39 years old and lives in Denver. “You can drive it up to a certain number of miles and still return it if it doesn’t work for you,” she said.

“I haven’t had great experiences as a single woman in car dealerships. I don’t want people to put me down, ”she added. Carvana allows free return of vehicles within seven days and 400 miles. Likewise, Vroom offers a seven-day or 250-mile trial.

Carvana delivered Ms. Minnen’s 2012 Subaru Impreza, took her 2003 Subaru, and signed the final papers in her driveway. “It was very clean and safe,” she said.

Online sellers have assuaged buyers’ concerns by including a warranty in the purchase price of a used car. CarSaver includes a lifetime no-deductible warranty on new and used cars. Gettacar, a used car platform exclusive to the Mid-Atlantic, includes a one-year, 12,000-mile warranty in its price and offers an extended warranty at a reduced price.

Many platforms aim to retain dealers. GM’s phone app monitors a car’s health and tells owners when to take it to the store. “We see this as an ownership experience,” Mr. Mehta said.

CoPilot, a start-up, offers “car buying tools for people who don’t understand cars,” said chief executive Pat Ryan. It will follow up on recalls and remind owners when it’s time to rotate tires or perform routine maintenance, Ryan said.

Some dealerships collect and return cars that require maintenance, reducing the need for expensive showroom complexes on major thoroughfares. If deals are done largely online, stored cars could share space with stores on cheaper lots, offering huge savings and potentially increasing dealer profitability – a decrease in dealerships that even benefits retailers. dealers.

Millennials may be driving the trend for online shopping, but platforms say other generations are quickly on board.

“My 78-year-old mother had no idea she could buy a car without going into a dealership,” said Doug Miller, Cars.com chief revenue officer. His 2020 Lexus RX 350 Moonbeam Beige, bought on his son’s platform, of course, was delivered last May.

“She loved buying the car in her driveway,” he said. “I don’t think she would want to go back to the dealership.”

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