Americans rethinking how they buy cars
Multiple visits to dealerships are on the decline while more consumers are researching their potential purchase beforehand.
This post comes from Philip LeBeau at partner site CNBC.
A new study shows car buyers around the world, including in the U.S., are changing how they buy new cars and trucks.
Multiple visits to a series of dealers are out, while the trend of consumers doing more advanced research ahead of buying a car is in.
"This is the most dramatic change we've seen in the auto industry and how people buy cars in the last 50 years," said Hans-Werner Kaas, McKinsey's senior partner.
Kaas and his team conducted their study by looking at consumer auto buying patterns at dealerships around the world.
The conclusion: Car buyers are doing more of their own leg work online and spending less time at dealerships.
Fewer dealership visits
The McKinsey report says the average buyer visits just 1.6 auto dealerships while car shopping, down from 10 years ago when buyers visited an average of five dealerships.
"The consumer now has more information online and through other sources, so they do not need to visit as many dealers," said Kaas.
Simon Soaf, general manager at Mossy Volkswagen in Carlsbad, Calif., has seen the change.
"Those days of going to six or seven dealerships to shop for a car are over. It is not going to happen again. Customers are more savvy," he said.
Soaf says the internet has become a major player in driving sales. He estimates that almost all of the customers at his dealership has done some type of advanced research on their own before entering the showroom.
As a result, fewer people are coming in to "kick the tires" and just look around as they did 10 or 15 years ago.
"The business has changed," said Soaf.
Less haggling, more time saved
When Mona Giamanco decided she wanted to buy a new car, she was dreading running around and visiting car dealers. So she joined the growing numbers of car buyers making their purchase through a third party referral.
In her case, it was Costco.
Last November, she picked out a Volkswagen Passat on the Costco website. The retail giant put her in touch with a local Volkswagen dealer who had the Passat at a preset price.
Within 48 hours Giamanco bought her Passat for less than the inventory price.
"In the past I would hop from dealership to dealership, taking several weekends, combing the lots trying to get a deal," she said, "But this was so much easier."
Costco sales surging
This year, Costco is expected to sell 375,000 new vehicles through its auto program.
Costco says most of the members buying new vehicles are looking for three things: A good deal, no haggling and not to waste time.
"We really save the members a lot of time by doing all that legwork on their behalf," said Jeff Skeen,general manager of Costco's auto program. "They would rather spend their weekends doing something else than haggling with car dealers."
Skeen says Costco car buyers wind up paying about $1,000 less than those who visit dealers on their own trying to get the best deal possible.
The 3,000 dealers paying Costco for referrals are part of the program because they'll make money down the road servicing the cars they sell. In addition, Costco members tend to have higher credit scores, so closing deals is not an issue.
Is Costco's auto program the way all cars will be sold in the future? No.
But Kaas and his McKinsey team say this is an example of how the car buying experience is rapidly changing.
"The consumer still uses the auto dealer. Those who can change with their customers will succeed," Kaas said.
More from CNBC
VIDEO ON MSN MONEY
Our family can no longer afford to buy New Cars and Trucks...
We buy used autos...Need our money more for other family expences...
I complained to Costco, but the same tricks still go on around here. The dealers are incorrigible.
Most people don’t trust car salesmen (including myself) and this sound like they’re trying to give costco auto program a boost. Costco or not, the real reason we’re rethinking about buying cars is:
1. Gas is too much
2. Insurance is too much (Geico my !ss )
3. Tolls are too much
4. Parking is too much
5. Tickets are too much
6. Repairs are too much
7. Miscellaneous are too much
At the end if the month you always ask yourself, " is is worth it ? " and 99% of the time you say " NO ". Don't get me wrong i do find it convenient at time, but the keyword is " At Times ". No more cars for me.
In the end, Costco and sites like Edmunds can be great starting places, but for people who like to save a little extra with their time, putting in a couple days work can be worth it. There will always be loads of people who do little research and pay more, people who do research, and get a good deal, but similar to everyone else who did that research, and then the people who do the research and then haggle with dealerships to get a very good deal.
As for the need for sales people....... well, you can't test drive over the internet and buying without test driving is one of the dumbest things I have ever heard of. More proof that people do not think before they purchase. What's next, buying a new home without stepping foot in it first??
Purchasing via the internet is fine AFTER you have visited a dealership, test driven the car. Only a complete boob would make a purchase the size of a vehicle without getting their hands on it first.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Use your organizing skills to make sure your financial house is in order too.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'