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DATE: Feb 28, 2014

Americans Rethinking How They Buy Cars

Content by Philip LeBeau


A new study shows car buyers around the world, including in the U.S., are changing how they buy new cars and trucks.

Multiple visits to a series of dealers are out, while the trend of consumers doing more advanced research ahead of buying a car is in.

"This is the most dramatic change we've seen in the auto industry and how people buy cars in the last 50 years," said Hans-Werner Kaas, McKinsey's senior partner.

Kaas and his team conducted their study by looking at consumer auto buying patterns at dealerships around the world.

The conclusion: Car buyers are doing more of their own leg work online and spending less time at dealerships.

Fewer dealership visits

The McKinsey report says the average buyer visits just 1.6 auto dealerships while car shopping, down from 10 years ago when buyers visited an average of five dealerships.

"The consumer now has more information online and through other sources, so they do not need to visit as many dealers," said Kaas.

"Those days of going to six or seven dealerships to shop for a car are over. It is not going to happen again. Customers are more savvy," he said.

Soaf says the internet has become a major player in driving sales. He estimates that almost all of the customers at his dealership has done some type of advanced research on their own before entering the showroom.

As a result, fewer people are coming in to "kick the tires" and just look around as they did 10 or 15 years ago.

"The business has changed," said Soaf.

Less haggling, more time saved

When Mona Giamanco decided she wanted to buy a new car, she was dreading running around and visiting car dealers. So she joined the growing numbers of car buyers making their purchase through a third party referral.

In her case, it was Costco.

Last November, she picked out a Volkswagen Passat on the Costco Auto Program website. The retail giant put her in touch with a local Volkswagen dealer who had the Passat at a preset price.

Within 48 hours Giamanco bought her Passat for less than the inventory price.

"In the past I would hop from dealership to dealership, taking several weekends, combing the lots trying to get a deal," she said, "But this was so much easier."

Costco Auto Program sales surging

This year, Costco Auto Program is expected to sell 375,000 new vehicles.

Who's buying?

Most of the members buying new vehicles are looking for three things: A good deal, no haggling and not to waste time.

"We really save the members a lot of time by doing all that legwork on their behalf," said Jeff Skeen, general manager of Costco Auto Program. "They would rather spend their weekends doing something else than haggling with car dealers."

Skeen says Costco car buyers wind up paying about $1,000 less than those who visit dealers on their own trying to get the best deal possible.

The 3,000 dealers paying Costco Auto Program for referrals are part of the program because they'll make money down the road servicing the cars they sell. In addition, members tend to have higher credit scores, so closing deals is not an issue.

Is Costco Auto Program the way all cars will be sold in the future? No.

But Kaas and his McKinsey team say this is an example of how the car buying experience is rapidly changing.

"The consumer still uses the auto dealer. Those who can change with their customers will succeed," Kaas said.

View the original article here:Americans Rethinking How They Buy Cars

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