Used car dealer competition no longer comes from other dealerships alone - photo of cars in car lot

Unusual Suspects: Used Car Dealer Competition Beyond Dealerships

In the past, it’s been common to think of used car dealer competition as being mostly limited to other dealerships, but that is no longer the case. The biggest competitors BHPH dealerships face today may surprise you, and their presence is changing the used car market. To remain viable, you need to change the way you compete as well. What are the largest used car sales companies and sources today, and what can you do to meet the new challenges they represent?

You Bought Your Car Where?

The answer to the first question has two parts, one of which may shock many dealers. The single largest seller of both new and used cars in 2018 is better known for groceries. Costco sold an astonishing 650,000 new and used cars in 2018 through the Costco Auto Program. Although that number is not limited to used cars alone, it does offer significant insights to used car dealer competition. Cotsco’s success shows clearly that consumers are increasingly willing to think outside the box when it comes to buying a car.

The next logical question is why, and the answer is, quite literally, simplicity. Many customers feel that traditional car buying is too stressful, too complex and too time-consuming. According to Consumer Reports, 40 percent of auto sales customers said they hate haggling over price and 42 percent said the car-buying process took too much of their time. Modern buyers want a simpler way to purchase and Costco has provided one – this makes them a notable source of dealer competition.  Affinity Auto, which handles vehicles for the Costco Auto Program, works with local dealerships to provide cars, SUVs, and small trucks at set prices. Not only are the dealerships involved forbidden from haggling over prices, they also are not allowed to offer any extras or upgrades. Customers find a vehicle they like online through the Costco Auto Program and purchase it online with two-day shipping, much as one would buy an item from Amazon Prime. In fact, like Prime, the auto program even has membership fees along with benefits and Costco offers it’s own auto financing, which further entices customers to remain members as they make payments online.

Many auto dealers are taking note and are adopting similar sales strategies. As you may have guessed, this is one way in which your BHPH dealership can deal with dealer competition. In fact, analysts say that car dealerships in general are faced with a choice: adapt to changing consumer demands by adopting process-simplifying technology and overall transparency, or continue haggling over prices, hiding fees, and losing customers as a result. MAXDigital, a consulting firm, found that 40 percent of the dealerships they spoke to favor the former over the latter, and are looking for ways to take the negotiation out of car buying.

The senior vice president of innovation at MAXDigital, Patrick McMullen, explained: “Consumers today don’t want to deal with salespeople. They just want to know they’re getting a fair deal.”

How Can BHPH Dealers Compete Online?

There are some ways in which even small BHPH dealerships can handle the used car dealer competition presented by online giants. The first touches again on transparency, along with other factors, because one thing BHPH dealers can offer which huge online used car sales companies can not is excellent, personalized customer service. For example, one customer interviewed by Consumer Reports stated that he was able to find the vehicle he wanted online and complete the purchase at the dealership in under an hour with no hassles or unpleasant surprises. The result is that he is extremely pleased by the dealership, and that in turn makes him more likely to recommend it to others. Add personalized customer care to this and you have a winning combination. In fact, according to Forbes, poor customer service is the biggest reason many customers prefer shopping online, so the more personalized service you can offer, the greater your edge will be over websites. This remains true for all small business regardless of industry, including BHPH dealerships, and is one way you can face used car sales competition head on.

Using mobile devices to your best advantage can also help you overcome new sources of used car sales competition. If you don’t already have a mobile marketing campaign, develop one. Also create a seamless online to in-person buying experience with dedicated apps and mobile sites. This will help to make you more attractive to modern consumers, who often do much of their shopping on mobile devices. At the very least, it will help to make shopping at your dealership nearly as convenient as shopping online, and that will help you attract more buyers.

Finally, connect with your local community. Some BHPH dealerships already do this and it’s a great way not only to increase brand recognition in your local area, but also to attract more customers to your door. Online shopping may be easy and convenient, but there is currently a push to buy locally that you can use to your advantage. Join your Chamber of Commerce, as well as civic groups. Participate in local charities, hold themed events at your dealership, and take part in larger social occasions in your area. Make it clear to potential consumers that you are more than a dealership that happens to be in the area, you are a part of the community, and you care about the place you call home. This is something that large online used car sales companies simply can’t provide and it will help you stand out from used car dealer competition.

What About Private Party Sales?

Of course, Costco and other online car sellers aren’t the only source of used car dealer competition. In fact, another major seller of used vehicles is one BHPH dealerships are probably already aware of: private parties. Take a moment and ask yourself this: of all of the potential customer that told your team they bought elsewhere last month, how many of them said they purchased from a private party? If you’re like most dealerships, you may have been hearing that response a lot lately. Car sales through sites like Facebook and Craig’s List have been rising for years. In fact, according to NIADA, in 2017 there were 12,168,616 private party used car sales and 14,106,537 used car dealership sales. The gap of around 2 million vehicles may sound like a lot, but on the national scale, it’s not as massive as you may think.

So why do private party sales offer so much used car dealer competition? One answer is similar to that concerning Costco. Consumers like being able to see a price online, pay that price without any additions, and drive away with a vehicle.  However, there are problems with private party sales that you can illustrate in marketing to explain why consumers should choose your BHPH dealership instead. It should be stressed, however, that for this to work, strong digital marketing and SEO strategies must be in place.

Buying from an individual rather than a dealership comes with several legal dangers. First, there are no legal protections in place. If a consumer purchases a vehicle from a private party and that vehicle turns out to be a lemon, the buyer has no legal recourse. Unlike a dealership, a buyer can not be sure the vehicle has undergone inspection, and that any problems have been fixed correctly. Second, all paperwork transferring ownership of the vehicle is the responsibility of the buyer and that makes the process more complicated. Finally, there is the danger inherent in dealing with strangers. Use SEO blogs, online ads, and other marking techniques to tout your dealership as a safer, less-problematic option for used car buying. Frame the higher prices or dealer fees as the necessary cost for convenience and legal protection. That will make help you gain an advantage over private sellers. If you add haggle-free and transparent pricing, as well as online accessibility, buyers will have little reason to prefer private sellers over your dealership.

By changing the way you think of sales and marketing, you can remain viable even as non-traditional used car dealership competition grows. The BHPH industry today is vastly different than it was 10 or 20 years ago, but by adapting to consumer demands and expectations, being more competitive online and clarifying why personal local service and a safer, better buying experience make your dealership the best option, you can remain profitable today. New and unusual competition doesn’t have to spell doom for traditional BHPH dealerships– it only means they must be willing to change and grow.

Consumer Reports
News & Observer
Washington Post

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