Car Selling Ripe for Change

What would the consumer electronics industry look like if it took 4-6 hours to buy a television? What would the wireless industry look like if it took 4-6 hours to buy a new mobile phone?

Looked at in this context it is almost incomprehensible that 17M new cars and 44M used cars will be sold in the U.S. in 2015. Because according to Autotrader.com, it takes 4-6 hours on average for a consumer to buy a new or used car.

In an effort to better understand what the future of car selling might be, Autotrader conducted an in-depth study last year including focus groups and consumer surveys. The outcome – released to the press earlier this week - pointed to some misperceptions regarding the future direction of auto retailing, but the study left troubling realities unchallenged.

The car buying process itself is time-consuming and challenging for both the customer and the dealer. According to Autotrader, the average car buyer in 2014 spent 16.7 hours researching their vehicle purchase online – up from 15.5 hours in 2013.

As if that information gathering burden were not enough, the actual process of acquiring the car at the dealership takes between four and six hours, on average. In sum, the average car buying experience is a daylong process – if it were uninterrupted.

Autotrader’s study acknowledged the shortcomings of the current process and identified some potential areas of improvement, such as enabling paperwork to be processed online to speed things up. But the strangest thing about the study was that it talked up the importance of the new car salesperson without focusing on the challenges facing those executives.

Autotrader says that salespeople play a critical role in the selling process and that a good salesperson and positive sales experience can overcome a cheaper price. In the words of Autotrader: “Consumers will pay more for a better experience.”

According to the Autotrader study, 54% of consumers would buy from a dealership that offers their preferred buying experience, even if it didn’t have the lowest price. The study further noted that more consumers (73%) will drive for a great sales person vs. lowest price (65%).

So Autotrader points to the importance of the salesperson, but neglects to mention the fact that salesperson turnover at the average new car dealership is 40% or higher. Because of the broken new car selling process – which takes upwards of four hours – dealers are incented to flood their sales floors with too many sales people.

While Autotrader cautions dealers against high pressure tactics that might undermine the positive selling experience, the study fails to look at the selling process from the dealer salesperson’s point of view. The average new car dealer salesperson is working a six day week and competing on an overcrowded selling floor.

In this context, selling a car every other day is not a bad close rate, but imagine the frustration experienced by a sales person after getting 3-4 hours into a vehicle sale and the customer changes his or her mind or simply walks out. How many deals are lost in this manner in an average week, month?

And what about the emotional evolution and investment that takes place during that 4-6 hour sales journey. Both the customer and the dealer feel increasing degrees of pressure which cuts both ways in the negotiating process.

Autotrader fails to go far enough in grasping the degree of pain felt by both the consumer and the dealer in the vehicle sales process. Here are some additional thoughts for changing the vehicle selling process:

How about bring the car to the consumer for test drives?
How about week-long test drives?
What about disclosing loan rates, payments and lease residuals along with correlated credit scores?
What about offering pre-approval for financing, like buying a house?
What about money back/vehicle back guarantees?
What about cost of ownership analysis?
What about negotiated discount rates with insurance companies?
What about assigning customers to new incoming sales people when the person that sold a car leaves the dealership?
How about introducing the person responsible for vehicle service to the new car buyer - or making him available to answer questions?
How about disclosing vehicle model service history?
How about disclosing dealership evaluation information?
How about disclosing information regarding the types of customers buying particular cars (with permission, of course)?
How about an area in the dealership to facilitate the customer’s on-site research?

The average dealership is a vacuum of vehicle information. Sometimes there are brochures and, lately, sometimes there are vehicle technology specialists. But more often than not, there is a paucity of vehicle info, or it is all accessible online – or via the customer’s or salesperson’s mobile device. Dealers can offer better in-store resources and better customer engagement.

It is one thing for Autotrader to say that a great salesperson can overcome a lower price offer from a competitor, but when the staff on the selling floor is turning over completely every two years, customer engagement and commitment to a particular dealer or salesperson is lost. (Sales people that have sold me new cars over the years have, with one exception, left that dealership within months of my purchase.) A picture emerges of stressed out sales people selling to stressed out customers.

No wonder the car buying experience appears to be ripe for change. It is! But change will require more imagination and creativity than suggested by the Autotrader study. Sixteen hours to research a new car purchase and 4-6 hours to close the sale is a huge red flag that the process is flawed. How many more cars can be sold with a more streamlined and customer friendly process?