Online webstore to the fore

Motor retail is one of those rare, curious industries which has so far resisted the pull (and push) of entirely online retail.

For customers researching their next car, things have definitely moved online, and every day thousands of people visit manufacturer, dealer, and online classified websites, like Autotrader. Yet once a customer has actually chosen their car, decided what spec they want, and if they want to buy with finance or cash, in most cases, a visit to a physical dealer is in order.

And this isn’t for nothing. Cars are complicated, and an old fashioned test drive feels still the best way of establishing how a car drives, how loud it is, how the gear box is, and so on. Add to this the fact that dealers generally provide a useful service for many customers, and that finance is in itself a complicated highly regulated product, and the reason why it has been hard to move car sales online becomes clearer. And that’s before you add an established dealer base who have a long and successful history under traditional retail methods.

But we’re beginning to see things change, and this is true in both the used space and the new space.

Obviously there are some dramatic differences here. In the new car market, cars are generally sold by franchised dealers, who get their cars from manufacturers, often to order. The cars themselves are in mint condition (at least they should be), and there is usually only a captive finance provider to really consider – who are themselves intrinsically linked with the manufacturer.

In contrast, the used sector needs to acquire vehicles from various sources, has multiple finance competitors, with cars that could be of various quality. Despite these challenges, we’re starting to see a few third parties come out to try and sell used cars online directly to consumers.

This almost immediately raises questions over some of the finer details about the process – test driving, finance, ensuring cars are of an acceptable quality, and more.

Ultimately this is still extremely early days. With larger dealer groups improving their online offering, and websites like AutoTrader making it easier than ever to search  through thousands of cars online with relative ease, there is no guarantee that the direct to consumer online model will even take off in the used car space.

And if it does take off, we don’t know what shape it’ll take. Right now companies will still be figuring out what works and what doesn’t and what is being offered today might end up being drastically different in a few years

But if it does take off, regardless of what form this takes, we could be looking at an important change in the market, one that will have implications for every part of the retail chain, including finance lenders and brokers.