Buying a car online: is this the end of the car dealer?
Keith Peile was sitting at home in Dorset one evening in January when he decided to buy a new Hyundai i10 from the comfort of his armchair.
"I'd seen Hyundai's television advertisement for its new Click To Buy online service," says the retired security officer. "I picked up my tablet computer and in ten minutes I'd chosen my new i10.
"I knew I would be getting the best deal so I was happy with the final price. Paying was easy, too."
In the weeks since Click To Buy was launched in January, 30 people have bought a new Hyundai from the site, and 134,000 people have visited it to find out more. Peugeot has since launched a rival service it calls Order Online, and both join the schemes already offered by BMW and Smart.
© Haymarket Buying a car online: is this the end of the car dealer? Hyundai's new system offers the greatest flexibility, though, in particular by allowing customers to pay cash for their new car, rather than being restricted to a choice of finance packages. The price of the new car is discounted, too, saving the customer the bother of negotiating. Like Peugeot's service, Hyundai's will also generate a quote for the customer's part-exchange vehicle.
Bundle these three features together and with Hyundai's scheme, interaction with a dealer is necessary only to deliver the new car to their home and arrange collection of the customer's trade-in vehicle, or at the dealership where the customer must sign documents if they're acquiring their new car on finance.
It's a simple process. Within seconds of clicking on the website I was quoted £2350 for my part-ex – a 50,000-mile, 12-plate Peugeot 107[1] 1.0 Allure 3dr – and had chosen to pay cash for my new car, a Hyundai i10 SE 1.0 66PS 5dr. Its on-road price had been discounted to £9495, from £10,075, leaving me with a cost-tochange of £7145.
However, just as I was about to choose to have my new i10 delivered to my house in two weeks' time, I noticed home delivery cost an extra £250. The trade-in valuation looked a little low, too (for example, What Car?'s online valuation tool quoted me £2415), but I was getting a big discount on the list price and you can't have both. Would I have done better using a dealer face to face?
© Haymarket Buying a car online: is this the end of the car dealer? At 3pm the same day I parked my Peugeot at Richmond Hyundai in Guildford and entered the showroom. A salesman soon introduced himself. I explained I was interested in buying an i10 and that I had a car to part-exchange. He asked me what I wanted to pay for the Hyundai and what I wanted for my trade-in, "in order to establish your budget".
I told him revealing that would put me at a disadvantage in the negotiation, adding that I just wanted his best prices, simple as.
We decamped to my Peugeot where the salesman gave it the once-over. He indicated the kerbed alloy wheels and thought the clutch was biting late. I returned to his desk while he debated its value with his boss.
He was back a few minutes later with a figure of £2150 and a price for the i10 of £9495, leaving a cost-tochange of £7345, or £200 more than the Click To Buy offer. However, he concluded our meeting by saying that for a decision now, he could reduce the gap, and I'm sure he'd have delivered it for free, saving me £250.
Had I been a genuine buyer, I could have compared his revised deal with Click To Buy's and negotiated from that basis (not mentioning, the online service's delivery charge, of course).
Later, Tony Whitehorn, CEO of Hyundai UK, explained to me that it might be possible to get a better price in the showroom than on Click To Buy, but that such an outcome wasn't ideal: "A customer mustn't feel that they get one price on the internet and another at the dealer."
"An auction house calculates the valuation and we underwrite it," said Whitehorn. "That means we're liable for the difference between the partexchange valuation and the price the car subsequently achieves at auction when it's sold, so it has to be right."
Whitehorn said Click To Buy would not replace traditional dealerships: "Although it suits people who like the convenience of buying from home and who don't want to haggle, it relies on our dealers to make it work. [A dealer has to] receive the part-exchange and confirm its value, guide the customer through their finance and then, when they've bought their car, look after it."
So dealers live to fight another day, but thanks to Click To Buy's price transparency and free valuation, car buyers have another tool with which to achieve a better new car deal online or in the showroom.
Hyundai isn't the only online player...
BMW RETAIL ONLINE
You can choose, configure and finance your new BMW online, but this system relies on dealer involvement to process and conclude the transaction. Prices published online are not discounted and to get a trade-in valuation you must speak to your nominated dealer.
ORDER ONLINE BY PEUGEOT
Allows you to choose, configure and finance your new Peugeot. It offers trade-in valuations for your old car, but you can't pay cash. The vehicle price includes the same customer saving as Peugeot's other advertised deals, but you can negotiate a further discount with the supplying dealer.
SMART ONLINE STORE
Relies on a high degree of dealer involvement. You can choose and configure your new Smart but you're restricted to three PCP deals – low monthly payment, standard and low deposit – and there's no trade-in valuation service. Home delivery of your car is free, though.
Other independent multi-brand online sellers...
Online car buying has boomed in recent years, with traditional broker sites now being joined by new companies that offer buyers a wide range of cars available to purchase direct from dealers without the need to physically visit the showroom prior to collecting the car. The benefit is that this allows buyers to select their car and negotiate a discount without having to face a salesman, while still being able to choose which dealership they buy and collect the car from. Among the entrants to the market is our sister brand What Car?, which has launched a new car buyers' marketplace where dealers are encouraged to list their cars at or below What Car?'s Target Price, which is the most it says people should pay for a car based on research by its mystery shoppers.
References
- ^ Peugeot 107 (www.autocar.co.uk)
