Why Dealerships Are Losing To Online Used-Car Sellers

Sep 13, 2016 04:10 AM EDT | Eve C.


Having a car of our own is not simply just an accessory to our lifestyle. Sometimes, it is necessary to have one because of the demands of our everyday life. However, some of the buyers tend to prefer used cars than purchasing brand new vehicles. Thus, dealerships have been significantly affected.

Apparently, Bloomberg reported that the companies who are under the used cars selling industry are luring buyers online away from dealer lots. This results in automakers' loss of profit.

Second-Hand Car Dealerships

According to the website, four companies, Shift Technologies Inc., Beepi Inc., Vroom Inc. and Carvana LLC have been carving their way to the middle ground, trying to provide security and assurance to the buyers who choose to buy a car on the Internet.

Precisely, they have been doing business with investors including Goldman Sachs Group Inc., Redpoint Ventures, and General Catalyst Partners. So far, these companies were able to attract more than $850 million in venture-capital funding from their business partners.

Dealerships and their Online Presence

It appears that these companies are acknowledging the fact that a percentage of the people would like to buy online because it could save them time and money. For example, Shift Technology was able to sell 1,702 used vehicles in the San Francisco Bay Area in the first 6 months of 2016, as per California Department of Motor Vehicles report. Check out their website here.

Meanwhile, Northcoast Research analyst John Healy expects used-car sales to still adapt the traditional way of selling pre-loved vehicles apart from online purchasing.

"The auto-purchasing decision, especially in the used-car market, is very unique. Consumers and dealers want to touch and feel and check that vehicle out before they transact it," he said. 

On the other hand, there are buyers who are willing to buy used cars online without test driving or a money-back guarantee. 

Do you think dealerships are losing to these emerging companies? Please let us know in the comments below.

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