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Internet and Cars...

The automotive industry was an early adopter of the Internet, or is it that the early Internet players quickly adopted the automotive industry.

We could have a lengthy discussion regarding the multitude of business models, who was going to get disintermediated, and a variety of scenarios on how it was going to evolve in the short and mid term.

One thing is certain, the Internet has become the Automotive Information Source, and empowered the automotive consumer, like never before in history. There is such a wealth of information, and resources regarding every aspect of the automotive industry. Today's consumer is extremely well informed, and more important empowered.

With this exchange of information, and knowledge. The general consensus is that it should be easier, should save time, and should lead to cost savings.

From the initial concept, and design of any vehicle to when it rolls out of a plant, the Internet plays a role in a multitude of ways.

The automotive industry has an extensive knowledge base on how to use, and what to do with the Internet. 

We are embarking on an "Internet and Cars" dialogue to review selected aspects of the Internet, and more important how a consumer can gain added value by using the Internet in a more targeted fashion.




Internet and Cars - Part 1

If the automotive consumer is empowered by the Internet. Does he know how to use the Internet to maximise the value of a purchase decision?

It is unfortunate that we don't have a Canadian version of Edmunds for both new and used vehicles. In Canada some of the information disseminated by Edmunds is not made available for public consumption. It must be the reason Edmunds does not have a Canadian version.

For used vehicles all meaningful information is readily available through Auto Trader. Its easier, with more transparency, and clarity to do a deal on a used vehicle than a new vehicle.

The Internet empowers a consumer, it should follow that the consumer will use this empowerment to their full advantage in maximising value. In rare instances it does happen, in most cases consumers get confused, frustrated, and often put themselves at a disadvantage.

As it relates to used vehicles to think that someone has been hiding under a rock for the past few years, and does not know the value of a vehicle is wishful thinking. To chase after the "Oh I got this incredible deal...thousands less", is double wishful thinking.

The Internet makes it easy for a consumer to quickly find a used vehicle, have an idea of the price to pay, have photos e-mailed to save time, communicate with the dealer, even make financial arrangements. You can do your due diligence 24/7/365 from the comfort of your home.

The Internet will not uncover the "incredible deal at thousands less". This seems to be the reason most consumers turn to the Internet when looking for a recent model used vehicle. Then get frustrated because they are targeting the wrong objective, and can't find the "incredible deal".

Since they can't find the "incredible deal", they now start looking for the "price vehicle", which they find in an instant. But the price vehicle usually has too many kilometers, or no balance of warranty, or other shortcomings.

The next step is an attempt to get a good vehicle at the price of the "price vehicle". Its worth a try...good luck.

Suddenly the usage of the Internet for the purchase of a used vehicle becomes unproductive. Maximising value just took a back seat to trying to find a low price.

As humans we seek emotional satisfaction in a vehicle purchase. This desire to uncover the "incredible deal", to get an advantage, its part of the human psyche. With used vehicles the Internet empowers auctions, and has conveniently removed any, and every possibility of the "incredible deal at thousands less" than market value even existing from the outset especially with recent model vehicles.

The emotional satisfaction is to find the "great value" and "great experience".




Internet and Cars - Part 2

How come the "incredible deal" doe not exist? With all this technology readily at hand it should be child's play to uncover the "incredible deal". We all read about the "big box retail" effect in lowering prices. How come it does not seem to happen with used vehicles?

It is not in the best interest of the automotive industry in general to have low values( at thousands less than the market) for used vehicles. Especially with recent model lease returns, it would negatively impact residual values.

The Internet through the auction medium has enabled and facilitated an industry wide system to easily uphold high values on used vehicles. Dealers across Canada can bid on a vehicle being auctioned in Toronto.

A good example is how a consumer uses the Internet through ebay when he is looking for used vehicles in Canada.

The individual looking to buy a collectible vehicle uses ebay to explore the availability, condition, and a vague idea of prices. He has to be the highest bidder to own that vehicle. For this person ebay works well.

The individual looking to buy a recent model vehicle turns to ebay looking for the "incredible deal", they know the value of a specific vehicle, they will make sure they stay much lower than the value in their bidding. For this person ebay does not work well, although they can practice their bidding.

One individual wants to find a collectible that is of interest, the other individual is looking for the "incredible deal".

The incredible deal at thousands less does not exist, and attempts to find it are futile, frustrating, and unproductive. Its an hyper competitive market place for recent model used vehicles, this competition is facilitated by the Internet, the consumer is the winner.

Focused due diligence using the Internet as the primary research tool, will quickly enable, and empower a consumer to get a "value deal" on a used vehicle.





Internet and Cars - Part 3

Being a used vehicle dealer, this is a "freebie" regarding new vehicles.

The Internet empowers consumers like never before. However, consumers are not using this empowerment to generate appreciable savings for themselves when it come to new vehicles.

The new vehicle market place is mired in extreme competition, in an oversupply situation, where the consumer is bombarded into sensory overload.

The new vehicle sales and incentive system is opaque at the best of times, and confusing most of the time. Depending on how a month is developing the intensity of the promotions either increase in ferocity or remain stable. Its a game of one program to the next program, and be certain that you read the fine print at all times.

The consumer is well informed about the features, list prices of the new vehicle they are considering, and the programs applicable to that vehicle at that specific time. Different models have different programs, depending on the priorities of the manufacturer.

The focus is for the dealer and manufacturer to "move" the inventory that is on the ground, the dealer is the middle agent in this process of moving the vehicle from the manufacturer to the customer.

The ideal system for a consumer is to do his due diligence, and order a vehicle from the factory, the customer gets a fair price, the dealer saves money in interest charges, and everyone is ahead. However, the incessant manufacturer driven programs take the emphasis away from ordering a vehicle and place it on taking a vehicle from inventory (the assembly lines have to keep on running). 

The manufacturer keeps the assembly lines running, the franchised dealer participates in a variety of programs, and incentives to move the inventory. The customer under the guise of a low interest deal is possibly duped into actually thinking that he is getting exceptional value.

The biggest weapon customers have is to hold back their purchases to the second half of the month. On the hope that the programs will improve in value. By now its a known fact that there is little profit in the sale of most new vehicles. In holding back for the end of the month the negotiators become the programs, and a sense of extreme urgency among the franchised dealers to reach the monthly numbers.

If you want exactly what you want, when you want it, at a price that meets your parameters, order your new vehicle from the factory.

If you want to be part of the "monthly churning process", play the program game and get a vehicle from inventory.



Internet and Cars - Observations

If we reflect on the influence of the Internet on the sale of vehicles, a big portion of the activities that were part of visiting a dealer or speaking on the phone have been replaced by the Internet.

All the preliminary activities relating to the purchase of a vehicle are occurring online, as per the agenda and convenience of the consumer.

The only thing....buying a vehicle is still a major purchase, and financial commitment, and although all the information is online, and one could literally do an entire transaction using the Internet its not "happening".

The reason that its not "happening", we are humans, we need to establish an emotional bond, and derive gratification from the decision. We need to touch, feel, drive, experience the vehicle that is being purchased.

The online due diligence saves time, acquires factual information, facilitates the decision process, augments the value in the transaction. Its a digital experience, which is informative, but it leaves an emotional vacuum.

The dealer is the provider of the "automotive experience" which touches the emotions. The consumer needs to quickly grasp that he is in an environment that is friendly, with clarity, and imbued with a high degree of trust.

Its easy to disseminate information using the Internet, its easy to communicate with e-mails, its very easy to present a facade which possibly embellishes reality.

When we are spending big money we want to be sold, preferably by another human. We want to see, and experience a level of intellectual integrity, which facilitates the transaction. We require to feel a strong sense of trust.

At times, its the case of you found the vehicle, but you did not find the dealer yet. It can be frustrating, to say the least.

At Strada we know, and understand the expectations of our customers. If we cannot give you a level of confidence,trust and clarity. We don't expect you to do business with us.