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Americans rethinking how they buy cars

Multiple visits to dealerships are on the decline while more consumers are researching their potential purchase beforehand.

By Money Staff Feb 26, 2014 1:46PM

This post comes from Philip LeBeau at partner site CNBC.

CNBC on MSN MoneyA new study shows car buyers around the world, including in the U.S., are changing how they buy new cars and trucks.

Couple shopping for car © ThinkStock, JupiterimagesMultiple 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.

Who's buying?

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

Feb 26, 2014 3:24PM
The car salesmen/women cannot close the deal.  All they do is run to the manager (usually sitting in a glassed in area off the showroom so they can see what is going on) and present him with what the buyer has said.  Then it's back to the customer with what the manager  said.  Back and forth until a deal is struck or the customer walks out.  The salesmen/women is nothing but a "runner" between the two.

Just saying...
Feb 26, 2014 3:33PM

Our family can no longer afford to buy New Cars and Trucks...

We buy used autos...Need our money more for other family expences...

Feb 26, 2014 3:24PM
I tried the Costco routine and found that the dealers were not good for their end of the bargain.  Lots of cheap tricks at what should have been the end of the transaction that drove the price right off the chart.
I complained to Costco,  but the same tricks still go on around here.  The dealers are incorrigible.

Feb 27, 2014 10:09AM

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.

Feb 26, 2014 3:28PM
Look back 10-15 yrs ago at what gas cost per gallon and the fuel mileage new cars were SUPPOSED to get and compare to today.  Let's guess, it cost's more to drive then or now? All of the regulations on car makers is supposed to save you money at the pump. Back then gas was around $1 so you all know, that's about a 200% increase to current levels. Mr LeBeau might want to do some real investigating instead of YUP more people use the internet.
Feb 26, 2014 3:41PM
Car purchasing is becoming a less emotional experience  and more intellectual.
Car sales people need the emotional component in order to get you to stay and purchase at their dealership. Just listen to the scripted lines when you walk into a dealership, or most anywhere for that matter. I think the sales persons job will rapidly change in the next few years as technology advances and fewer and fewer  people purchase cars for emotional reasons. 
Another reason the car salesperson job is fading is due to the consumer wising up to the verbal and visual tricks that are often used, for instance , the old standby how much do you want your monthly payment to be? not this car sells for 39780 dollars. It's hard to get a price commitment from a dealer so you can't decide if a car is priced right or not. It will be exciting to see in the next few years how this sorts itself out and that's assuming that ole hope and change doesn't completely do the economy in.
Feb 27, 2014 10:21AM
I have seen many who are holding on to their older vehicles longer and longer because they don't want the high car notes and aren't receiving the cost of living raises they once enjoyed. My brother and sister use to trade vehicles every two to three years and now both have had their vehicles for six and eight years and do not plan on buying another one anytime in the near future either. Mine is ten years old and I've never kept one that long since I began driving in the early '70's. Most of my friends and most of the people I work around have older vehicles that are six to ten years old, also. My boss bought a new SUV, but, she makes the money. My son and his wife's SUV was eleven years old when it broke down a few months ago and had to borrow one of her dad's trucks until she completed nursing school and could afford to buy another one. Who can afford the cost of a car, used or new, anymore unless they are forced into buying one as my son and his wife were? Trucks and cars no matter the cost are just too unaffordable these days and no one has the extra money anymore to buy one. No raises and higher cost of living which means there will be no trading vehicles.
Feb 26, 2014 8:13PM
I happen to be a car salesman. The dealership I work for is a family owned, reputable company. The horror stories I just read would NEVER happen here. And, we sell quite a few cars and trucks via internet inquiries. It really isn't a complicated process unless you are unfortunate enough to go to the dealers that are "stuck" in the plaid suite days.
Feb 26, 2014 3:18PM
I use Costco and employee discounts offered through my work when purchasing a car as a starting point. I don't stop there though. I usually visit 2 or 3 dealerships to test drive 2-3 cars within the same car class I'm looking at. I make sure the dealerships know I'm testing out competitor cars and give them a chance to offer me a deal better than what I'd get at Costco and or the competition. If it's a lot better than I expected, I might stick around and bypass the other dealerships, but that's rare. Once I pick the model I'm going to get, I then visit another dealer of the same manufacturer (for example I visit a 2nd Nissan dealer if I decided I like the Nissan the best between the other two competing companies). I then see what they'd be willing to offer for my business and then I go with either that price or by the closest location to where I live by default if they're the same price.

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.

Feb 26, 2014 4:28PM
You mean we can't count on the reduction in the MSRP anymore, Darn!
Feb 26, 2014 11:41PM
If you "need" a loan to buy the car you want, then you can't afford it.  Buy something cheaper with cash - there's no shame in buying a used car.  Consumer debt is like white sugar - it's poison.
Feb 27, 2014 11:38AM
Come on COSTCO, that sleaze bag car salesman has a family to feed.
Feb 26, 2014 8:22PM
I will buy used from now on....the guys at Click and Clack on are experts and they advocate used cars, period.
Feb 26, 2014 5:12PM
"Americans rethinking how they buy cars". Don't you have to THINK to be able to "rethink"? The vast majority of Americans do not do homework before making an auto purchase, they decide that they want a vehicle and then just start test driving, completely stupid. The proof is on the roads, when you see brands and models that are consistently rated as poor quality and unreliable yet there they are, by the thousands. Perfect example for you...Ford trucks have had a "less than average" rating for reliability from JD Power, and has for several years now, yet the F-150 is the best selling vehicle in the country. The Chrysler Town and Country, same thing, Jeep Grand Cherokee...ditto, yet they are all over the roads.
  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.

Feb 26, 2014 5:00PM
The point of having a showroom full of salespeople was to snag the happenstance wanderer or the comparison shopper. If people know what they want and they make all the decisions in advance, that is one less job on future resumes.
Feb 27, 2014 9:19AM
The salesman's job is to work the customer & get them to do 2 things: 1) I'm ready to buy now; & 2) make an offer: "I'd like to pay $XX per month for this car. The manager possesses the power to craft the deal & lower the selling price, which in many cases is packaged with a trade or dealer/manufacturer incentives.
Feb 26, 2014 6:29PM
Bad deals are the norm, service is not consistent and big auto companies use the same less than satisfactory companies to sell their vehicles.  You see two or three companies dominate an entire city selling competing vehicles.  Auto comapnies may take no risk, except low service and low ethic dealerships.
Feb 27, 2014 9:39AM
It took us 16 months to buy our current car. I did internet research, and visited the dealers 3 times each to drive the BMW x3, the Audi Q5, and the Volvo XC60.  We purchased the Volvo, they did not force a package deal on us to get the options we wanted. Also, we ordered the car with what we wanted and the color we wanted. It was worth wait. A great car, and after 19 months of ownership still not one problem that required taking it back to the dealer.
Feb 26, 2014 3:13PM
Who needs car salesmen/women that's just a gone by era and not needed.
Feb 26, 2014 4:57PM
Big car dealerships are on the way out like Malls.  Eventually, people will visit a showroom owned by the manufacturer to see the cars in person- there will be no sales people there.  Then they will go online and choose their options and the car will be delivered to their home.  Service will be handled by certified independent centers.
1.I always buy used cars owned by mature people so I don't take the depreciation hit, and any problems have already been taken care of by the first buyer.  
2. I always pay cash
3. I never talk to a salesman face to face.  If I am buying from a dealer, I go to the lot when its closed and look over the used cars.  If I see one I like, I e-mail them and ask for the key in hand cash price.  After the price is settled on, I go to my bank, get a cashier's check made out to the dealer, scan it and e-mail it to them and tell them they can have the check when the car arrives at my door equipped as agreed.
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