The Evolution of the Online Car Buying Process - MaxTradeIn

The Evolution of theOnline Car Buying Process

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Table of Contents IntroductionIntroduction

Consumer Car Buying Habits and Frustrations

The Evolution of Car Shopping 1. Online Penetration 2. Demographic Data on Car Shopping 3. Percent of Customers Who Trade In or Sell Their Old Car to Purchase a New Car

Top Consumer Frustrations in Car Selling/Trade In Process 1. Dealing with Salespeople 2. Spending Time on the Process 3. Determining the Value of Their Used Car

Top Online Resources Used by Consumers to Determine the Value of Their Used Car 1. Kelley Blue Book 2. Consumer Reports 3. Edmunds 4. MaxTradeIn

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The car buying process is making a huge shift to digital, meaning car dealers need to adapt and recreate the experience of the dealership online to cater to the digital customer.

To better equip themselves, buyers are going online, at an astounding rate of 83%, spending an average of 18-19 hours researching before making a vehicle purchase.

And as the industry shifts, consumers’ online activity, including consumer research, interactions with salespeople and actual purchases and sales of vehicles, is growing at an overwhelming rate.

If dealers fail to create an online presence to effectively interact with today’s customers, they lose the opportunity to put their dealership in front of over half of those individuals looking to purchase a vehicle.

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$370 billion

Increase in number of family members, which leads to requiring a bigger vehicle.

The old vehicle breaking down frequently and or requiring more maintenance than it is worth.

Change over to a better looking or more powerful model as people become more affluent.

The sale and purchase of used cars is almost as old as the automobile industry itself. As the largest retail segment of the U.S. economy, the used car industry is worth $370 billion a year and makes up almost half of the auto trade.

While the used car market is lucrative, it can be a pain and a burden for car buyers and dealers alike. But with the emergence of software and technology, the car buying process can be a lot easier and beneficial for all parties involved.

So, why do people decide to buy and sell used cars?

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Consumer Car Buying Habits and Frustrations

2People upgrade to newer carsfor many reasons, including:

Many people cannot afford new cars.

Since used cars cost less, people can purchase a higher-end model with their budget.

People may want to reduce costs on insurance and registration, both of which are significantly lower for older cars compared to newer cars.

Many people cannot afford new cars.

Since used cars cost less, people can purchase a higher-end model with their b d t

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Most people try to sell their cars to other buyers, including both independent and franchised dealers.

That being said, many people are also waiting to buy new cars and purchasing used cars instead.

There are buyers for used cars, regardless of the wear-and-tear and the increased maintenance these cars require, because:


The average cost of a new vehicle was $30,500 in 2012, while the cost of used cars has decreased for both franchised ($10,558) and independent dealers ($9,158) in 2013.

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used carfranchised dealer

used carindependent

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The 2013 Car Affordability Study undertaken by Interest.com reveals a typical household cannot afford a new vehicle. The study reveals that Washington is the only state in the U.S. where a typical household can afford the monthly payments that a new vehicle would demand, with a median income of $86,680 a year. As new vehicles become less affordable for buyers, the used car market will continue to grow.

A survey by Maritz Research, which surveyed 80,219 buyers of 2012 model-year vehicles, revealed that 11.4% of buyers did not take a test drive and rather relied completely on online research. Even when scheduling a test drive, 9.5% of the buyers used the Internet to schedule a test drive.

People are now moving away from paid and promotional content and increasingly seeking out genuine user experiences and credible third-party reviews. The rise of social media has aided this shift. Consumers interact among themselves, whether by computer, smartphone, tablet, etc., to discuss products and seek feedback, searching for product information from various sources. And finally, shoppers are shifting the paradigm by approaching the marketer, initiating their purchase from a position of knowledge and strength.

Many people still think of the car buying process as very traditional, with fast-talking car salesmen and high-pressure negotiations. But with the rise of digital technology and software, the car buying process has completely changed.


Online Penetration

83%of the people undertake onlineresearch before buying a car.

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A study by Think Insights and Google revealed that:

of new car buyers use theInternet to gather information.

of new car buyers used theInternet to compare vehicles.

of them used it to makethe final purchase decision.


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68%68% 69%69% 45%45%

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A study by Arthur D. Little revealed that 32% of Americans may buy their new cars online by 2020, with little to no interaction with the dealership selling the vehicle.

These statistics might be very disconcerting for independent and franchised dealers, as a dealer’s closing rate increases dramatically when they can get car buyers into their physical dealerships. If buyers continue to rely on online research instead of physical interaction with the car, it will be imperative for dealers to make the online customer experience more user-friendly, interactive and engaging, in order to maintain their close rates. In other words, dealers need to recreate the experience of putting the prospective buyer behind the wheel without actually having them come into the dealership.

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Demographic Data on Car Shopping

Gender demographics have a profound impact on the buying process. When trying to sell a new or used car, it is imperative that dealers become familiar with their target markets and how they can appeal to their needs.

In past years, men dominated the buying scene, but recently women caught up and now have the same, and at times, more influence in retail purchases.

Women now comprise 47% of the U.S. labor force and are the sole or primary provider in 40.4% of U.S. households today. Families where Dad is the breadwinner and Mom is the homemaker have fallen from 70% in 1960 to 31% in 2011.

A recent study, “The Female Factor” commissioned by Women@NBCU, revealed a change in women’s spending habits over the last decade.

Women are now more involved in the family’s finances and have a big say or controlling interest in big-ticket item purchases like cars. Actually, over half of the car-buying decisions are made by women.

In 2011, 97% of women negotiated how much they would pay for a car, while the corresponding figure in 2000 was 86%.

70% 31%1960 2011 86% 97%2000 2011

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13Women have a significant say in 85% of all consumer purchases.

The product specific involvement is:


new cars65%

92%

91%

vacations

80%

93%

healthcare

food

new homes

66%PCs

According to consulting firm A.T. Kearney, women purchase 60% of all cars. However, 74% of women feel misunderstood by automotive marketers, while only 59% of women feel misunderstood by food marketers and 66% of them feel misunderstood by health care marketers.

For example, male and female minds work differently and they shop for vehicles differently, making it that much more important for dealers to recognize these differences when interacting with prospective buyers.

According to LeaseTrade.com, men tend to rely on assumptions and preconceived notions about products, while women tend to ask more questions, even ones which men consider as obvious.

When making a purchasing decision, women factor in both emotional and rational sides, while paying

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used cars

On average, about 60% of a dealer’s used stock are trade-ins from buyers looking for new cars.

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close attention to detail. Therefore, layering emotional decision-making opportunities (such as tying a vehicle’s use to their family’s interests to stress practicality) while also including rational information (such as information about fuel efficiency, seating capacity, etc.) in the message has the highest impact on the female buyer.

On average, women have an average of 171 contacts in their email or mobile lists, and 92% of women pass along information about deals or finds to others. But this also means they can use those contacts to tell others about negative experiences they've had with a brand.

Making women feel more comfortable and in control in a dealership will be key to closing more sales within that target market. Furthermore, providing them with as much information as you can online will encourage them to consider your offerings over those of your competitors.

CNW Research estimates that 40.5 million used vehicles changed hands in 2012, representing a 4.4 percent increase from 2011 figures. Of the 40.5 million used cars sold in 2012, only 1.8 million were Certified Pre-Owned (CPO) cars (i.e., were sold by franchised dealers). CPO cars represent only 4.5 percent of the total used market. New car sales, based on forecasts, should increase by 1 million in 2013 and foster an additional 600,000 used car sales.


Percent of Customers Who Trade In or Sell Their Old Car to Purchase a New Car

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Top Consumer Frustrations in Car Selling/Trade-In Process

Selling or trading in a car is always a tedious process, which involves a lot of time, energy, and motivation. Most car buyers report the top consumer frustrations in the car selling or trade in process are:

Allow the buyer to guide the decision making.

An overwhelming 81% of buyers are less likely to buy if they perceive a salesperson to be over-exaggerating or plainly misrepresenting facts. Being too aggressive can also kill a deal, especially with women.

Because women often feel ignored during the car buying process and are generally intimidated by the “know-it-all” approach, approaching women as a knowledgeable partner in their search is more important than ever.

Women tend to ask all of the questions they have, even questions with answers that men might consider obvious. Due to the fear of getting taken advantage of, women are inspired to often over- prepare and over-compensate with extensive

- Dealing with salespeople.

- Spending time on the process.

- Determining the value of their used car.

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Most car salespeople are seen as pushy, and this is one of the main reasons why more people are going online to do research and make transactions instead of going to a physical dealership. In order to change the general perspective, it’s important that dealers begin to act as an accessory who can ease the process, rather than making the process more stressful or forced.

Dealing with Salespeople

research ahead of time. They usually know exactly what they want.

Evidence suggests a majority of people find dealing with salespeople and buying a car stressful. Some major stress points include:

Vehicle salespeople can help car buyers with the following decisions:

Making the client feel comfortable is of the utmost importance.


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• The overwhelming amount of choices available in vehicle brands, models, etc.

• Time spent on researching vehicles.

• Dealing with salespeople.

• Haggling over the price.

• Lack of pricing transparency and wondering if you’re getting the best price

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● Find out which vehicles fit their needs and budget.

● Read reviews to ascertain the advantages and disadvantages of each vehicle.

● Compare websites to get an idea of the overall price range for used vehicles and trade-ins.

● Research financing, by seeking out interest rates from local banks and credit unions, rather than relying solely on dealer finance.

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Selling or trading in a car is a time consuming process for the seller and is best done after extensive research and comparing offers.

Consumers who are looking to trade in their vehicle are:

● Resisting the pressure to buy immediately. Any offer is likely to remain that way for at least a few days and is unlikely to be good only for that hour.

Walking out of a dealership and going somewhere else, to be exposed to a full range of information, so they can comparison shop. Providing the customer with the best information in the way they prefer will help you make sure they come back to you to purchase their car.

Determining the value of the used car is the trickiest and most critical part of the vehicle trade-in process for the buyer and the seller. If the trader prices the vehicle too low, then they have to pay more money out-of-pocket for a newer vehicle. But the constant struggle is trying to find the middle ground for the buyer and the seller.

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Spending Time on the Process

Determine the Value of the Used Car

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19On the other hand, many traders price their vehicles too high, owing to:

This approach can be counterproductive as the trader may end up making payments on new and used cars at the same time.

Online websites offer a wealth of information, allowing those looking to purchase a vehicle to gather in-depth information on both their current vehicle and new vehicles they may be considering, along with financial options.

Tools that exist to assist consumers in determining fair market value for their vehicle include:

Utilizing these tools correctly will play a major role in how your customer determines the value of their used car and how they perceive your dealership.


•● Bad research.

● Emotions attached with the vehicle.

● Wanting to drive a hard bargain.

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● Websites such as Kelley Blue Book (kbb.com), Edmunds.com and MaxTradeIn, which assist customers in determining their vehicles’ worth.

● Newspaper and online classifieds.

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● Kelley Blue Book (KBB)

● AutoTrader

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Top Online Resources Used by Consumers toDetermine the Value of Their Used Car

Consumers use tools like these to determine the value of their used cars:

While the first three resources listed to the left are useful, MaxTradeIn combines all of the benefits of car research and purchases into one place. We spare customers the painful process of driving around town to different dealerships to negotiate the best trade in price for their vehicle. At no cost, consumers list their vehicles as a trade-in or sale to participating local dealers. Consumers planning to trade in their vehicle choose a maximum of six dealers to bid within a 48-hour window. Those choosing to sell, determine how far they’re willing to drive to transact. During the 48-hour period, the owner can accept an offer of their choice and MaxTradeIn only provides their contact information to the sole, chosen dealer. If the consumer doesn’t choose a preferred bid, their contact information goes only to the dealership with the highest offer.

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● Edmunds3

● MaxTradeIn4

MaxTradeIn differs from KBB, Edmunds and AutoTrader in that it is user-driven and not another automated service, thus giving the customer a specific value to their vehicle. Sellers enter their information, such as make/model, VIN#, mileage and condition, then choose local dealerships to make an actual, real-time offer. Dealers bid from their dealership and buyers take their vehicles directly to the dealership to close the deal. In the end, dealers get the quality, used car inventory they need, without the expense and unknowns of traveling to auctions, while consumers get the maximum price for their vehicle.

The car buying process has drastically changed over the past ten years and auto dealerships need to adjust in order to take their piece of the pie. Changing the way you offer your products and services can attract even more customers than you had before.


If you’re looking for an all-in-one package, contact us at MaxTradeIn to learn more about our dealer solutions.

Learn More at: dealers.maxtradein.com


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The Evolution of the Online Car Buying Process - MaxTradeIn

Automotive

The Evolution of the Online Car Buying Process - MaxTradeIn