“What price will put you nice folks into a used car today?” The cartoonish used car pitches of yesteryear vanished with the pandemic used car shortage and subsequent pricing spike, elevating online buying experience as the big differentiator in pre-owned sales today.
In a recent blog post, Cars.com noted that an analysis of its dealers showed median used-vehicle prices started rising in January 2021 as new car production slowed, reaching “a peak of around $25,500 in February 2022. Since then, prices have remained elevated compared to previous years but have seen a modest dip in recent months: The median price for all used models was approximately $24,000 in July.”
Compare that to the July 2019 average of $17,500 and it places median used car prices nearly 40% higher in 2022 than in 2019. With price not a lever dealers can use to convert lookers into owners, online buying experience is turning out to be a convincer for more consumers.
We examined this in “The Key To Satisfied Car Buyers Is Digital Disbursements,” a PYMNTS and Onbe collaboration, part of our “Expanding Payments Choice” report series with Onbe. It notes that “The digital transition has taken automotive customers out of the showroom, forcing dealers and auto companies to develop better end-to-end digital solutions. These go beyond the sale, and companies that can digitally maintain customer relationships have an advantage.”
According to that report, 72% of customer interactions over vehicles now take place via digital means, and 78% of used car buyers surveyed said they were highly satisfied with this process.
Perhaps most notably, price — traditionally the reason buyers gravitated to used vehicles in the first place — is now a motivator for just 21% of used car buyers, per the report.
“Twenty-five percent of consumers said their top reason for buying online was the ability to find the car they wanted, while 21% said it was price,” the report said, noting that “a positive online buying experience appears to help bring shoppers back, as 62% of online buyers said they had purchased a car online before.”
Add to this loyalty programs running the gamut from General Motors to Tesla, which in GM’s case is a point system that builds a balance usable on future car purchases. Per the report, “Julie Heisel, director of GM Rewards and GM Card, said the company recognizes the importance of a positive rewards experience in continuing to grow customer loyalty.”
See also: New Car Sales Up 9%; Used Vehicles Sales Drop 17% YoY for August
Shifting Demos Drive Auto Sales Strategies
The change from lot-roaming and tire-kicking to browsing car buying websites Amazon style are not unwelcome by consumers, famously unnerved by dealing with slick car sales reps in person.
As “The Key To Satisfied Car Buyers Is Digital Disbursements” found, younger demos are the rising force in car buying today, and companies that cater to the preferences of these digital-savvy consumers are reaping the benefits at a time when big purchases like cars are being postponed.
Research found that 68% of consumers under age 30 plan to purchase or lease a vehicle in the next 18 months, adding that “these buyers increasingly want end-to-end digital experiences, from selecting to financing to servicing vehicles. To win their business, automotive brands and companies providing supporting services need to be ready to offer frictionless, flexible payments and meet expectations for instant gratification.”
Rewards and incentives have become a bigger part of what makes a satisfying car buying experience, boosting loyalty in who they will buy their next car from.
Read: New Vehicle Prices Up for 5th Month, Kelley Blue Book Says
Per the Onbe report, “Millennials want instant gratification and smoother digital experiences when buying a car and when receiving payments, whether they be associated with loyalty programs, service center visits or auto loan refunds. By providing better digital experiences that engage consumers online and through mobile devices, the auto industry can increase brand loyalty and gain repeat business.”
While only 2% of car sales are estimated to happen online today that number is expected to increase as younger digital-first demos becomes the primary customer base, edging out baby boomers and Gen X buyers.
In an interview with PYMNTS, Tarek Kabrit, co-founder and CEO of Dubai-based online auto marketplace Seez, said car buying will move increasingly into the digital domain and its customers expect payments ease and price transparency in a sector not known for either.
“Think about Amazon, Airbnb, Uber — none of these [platforms] own the inventory. What they did is to create the infrastructure [like] tech integrations, payment logistics, operations, customer support, and then they connected supply and demand […],” Kabrit said. “So, in the auto space, we feel that the winner is probably going to be a platform as well.”
Read: Automotive Retail Needs to Think More Like Uber and Open Table to Sell Cars Online
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