Auto Dealers And Customers See Things Differently; Done Right, Online Commerce Can Help

Consumers and car dealers are on different wavelengths in a couple of important ways that affect the customer experience, according to research from Capital One, a major bank-based auto lender.

For one, dealers may be underestimating how much talk of a possible U.S. recession is rattling consumers, says Sanjiv Yajnik, President of Financial Services at Capital One.

For another, most dealers report that the purchasing process is “very or completely transparent,” while only around 1-in-5 consumers agree.

“As dealers approach 2023, dealers in general are feeling like it is going to be a great year,” Yajnik says in a phone interview.

“They’ve just come off a great year, in 2022, and in 2021. Inventory is limited. Profitability is the best they’ve had in many, many, many years. Looking at 2023, dealers are feeling like it’s going to be great year,” he says.

“The customer, on the other hand, is not feeling that great,” Yajnik says.

According to an annual survey of both consumers and auto dealers, 84% of the dealer respondents say it’s “a good time to buy a car.” Only 33% of the consumers say the same, and 47% say it’s “not a good” time.

Respondents included more than 2,000 consumers who recently bought or were considering buying a car. Around 400 U.S. dealers responded to the survey, Capital One said. The survey was fielded in October 2022.

Like the question of whether it’s a good time to buy, dealers and consumers split over how transparent the purchase process is. Among dealers, 68% said the car buying process is “very or completely transparent,” vs. 21% of the consumers.

A big part of the problem is most online, third-party payment estimators are inaccurate, Yajnik says, so customers come into a dealership with unrealistic expectations of what they can afford.

Accurate e-commerce tools are a potential solution, Yajnik says. Capital One is an early mover in online commerce for auto finance, a business that has been slow to adopt e-commerce, compared with other retail industries. The bank says its so-called Navigator Platform produces “penny-perfect” monthly payment estimates.

In a webinar sponsored by Capital One, dealer Drew Tutton said customers lose faith in a dealership when they’re quoted a different payment than they expected.

Tutton is a managing partner of Voyles Automotive in Metro Atlanta, which has four dealerships, and owner and president of Tutton Group, consisting Tutton Chrysler-Dodge-Jeep-Ram, plus three recreational vehicle dealerships.

“We would estimate what the payment would be. The customer would estimate, based on their credit score. That created a lot of non-transparency. A customer with a 700 credit score, say, would find out that the interest rate is much higher than they anticipated,” Tutton said. A 700 credit score would typically be considered a prime-risk customer.

Yajnik says dealers need to embrace accurate, up-to-date digital tools to win trust and increase transparency.

“Dealers need to make the jump if they want to be successful,” he said. “The ‘jump’ being, not to tiptoe, but really to embrace digital products along with what they offer in the store.”