Auto Dealers Lag Other Retailers At Online Selling: Capital One Survey

Auto dealers are patting themselves on the back for greatly accelerating a move into online retailing in response to the COVID-19 pandemic. But despite real progress at many dealerships, consumers still see online auto retail as lacking, according to market research from Capital One Financial Corp.

“Dealers believe they made a big move in digital, and therefore transparency,” said Sanjiv Yajnik, president, Financial Services, and head of Auto Finance at McLean, Va.-based Capital One.

According to the bank’s recent annual Car Buying Outlook survey, 77% of auto dealerships surveyed describe their online process as “transparent,” up from 54% a year ago.

However, consumer responses moved in the other direction. In the latest survey, 26% of consumers described online retail as transparent, down from 40% last year. Respondents this year were 2,200 consumers who either bought a car in the last six months or say they plan to buy one in the next two years, plus 530 dealers or dealership managers, Capital One said.

“Customers say, ‘Wait a minute. They’re not really making this thing transparent.’ If you think about it from a competitive standpoint, then it makes a lot of sense. Due to the pandemic, the digital economy was accelerated by, I would say, five to seven years,” Yajnik said in a phone interview.

While auto dealerships made a lot of progress online, they were behind other retail industries in their online approach before the pandemic. And as retail industries accelerated in the pandemic, dealerships find they’re still behind, he said.

A lot of dealers really are ahead of the curve in adopting online retailing — by auto industry standards.

But historically, most dealers see online strictly as a research tool for consumers, and a way to generate leads for brick-and-mortar dealerships. The goal has been to drive shoppers to the showroom, where the real selling could begin. Until the customer is eye-to-eye, the average dealership tends to avoid talking about price.

To be fair, Yajnik said, buying a car is a complex transaction. The new-car price is usually negotiable, there’s often a trade-in to take into account, plus financing, with a lot of variables like the customer’s credit score, the size of the down payment, interest rates, and loan terms.

The technology exists to handle all these variables online — Yajnik says Capital One has an app called Auto Navigator that provides a “penny-perfect” monthly price, interest rate and other terms without visiting a showroom. There are plenty of competing apps, too.

Most consumers still want to visit a dealership at some point before they take delivery. According to the survey, 75% of consumers said they want to use some combination of online and in-person shopping, and surprisingly, 40% said they would visit at least three dealerships.

But dealers can’t drag their feet, Yajnik said. “Dealers need to make the jump. Because I believe dealers who don’t make the jump, who feel like they’ve done enough, but they’re not going far enough, they are in danger of obsoleting themselves.”