Are Car Dealerships Coming To an End?
There are numerous reasons as to why car dealerships are coming to an end, the primary factor being that people would rather buy cars online.
Written by Serena Aburahma
Reviewed by Kathleen Flear
When it comes to
car buying
, many people still picture the classic car dealership full of shiny cars, big signs advertising their savings, and a slick salesman in a suit asking what they can do to get you a new vehicle today. However, thanks in part to companies like Tesla, it's possible that car dealerships may cease to exist.
Tesla has already revolutionized the industry in several record-breaking ways, but how have they potentially driven the nail in the car dealership coffin, and where are buyers purchasing their cars these days?
Jerry
has all the details on the changes on the state of car dealerships.Car dealerships are a relic of the past
Market Watch
put it best when they stated in an article that "Few would mourn the death of the traditional car-buying experience." But, what is the traditional car-buying experience? It has changed over the years as technology has progressed.In the past, people would go to a physical location, usually a wide lot attached to a small office building, where they would pick out the car they wanted from a large selection.
Then, a salesman would help walk them through the process, take them on a test drive, draw up the financing paperwork, and hand the customer the keys to their new car if everything went smoothly.
However, in today's digital era, fewer and fewer people purchase items at physical locations. Instead, there are resources for purchasing virtually anything you want on the internet, and cars are no different.
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What led to the demise of the car dealership?
An increasing reliance on technology combined with people having less time to go through the whole process in person has contributed to the decrease in popularity of the car dealership.
It also doesn't help that most car salesmen, mainly used car salesmen, did not cultivate the most trustworthy or positive reputation among consumers.
In addition, people no longer want to tolerate being bombarded by sales pitches for gadgets they'll never use,
such as giant touchscreen infotainment systems
.Along with the already shifting attitudes toward in-person car buying, the pandemic massively changed things.
Not only did the industry need to rely more on digital means for car selling, but the microchip shortage slowed production massively. This dip in production meant that dealerships had fewer cars on the floor, ready to drive off right then and there.
This situation led to dealerships stocking a few of each model for test drives. Once the customer tried out the car they wanted and knew what features they wanted, it was only a matter of ordering the vehicle directly from the manufacturer.
This way, companies could limit production to direct orders rather than churning out hundreds simply for stocking car lots.
Tesla has been at the forefront of the change in car buying
Even before the pandemic, there has been a revolution brewing in the way people purchase cars. Tesla produces a variety of vehicles for every type of consumer, but it's unlikely that you will ever see a Tesla sitting in a franchised dealership.
Tesla operates on a Direct-to-Consumer (D2C) business model, meaning they cut out the middleman car dealers to sell to their customers from their network.
Tesla mainly performs their sales through a self-service online store, where customers can browse the inventory, choose their options, and have their car shipped either directly to them or a Tesla-owned showroom.
The company doesn't even spend much on advertising, relying on the power of their business model and the quality of their product to advertise for them instead.
This direct sales approach has inspired multiple businesses, including Carvana, whose business model can be best described as ’car vending machines'.
Thanks to companies like Tesla and Carvana, there is no longer a need for the 900 car lot or the slick-suited salesman. Now, consumers can buy direct and get exactly what they want with less hassle.
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