The COVID-19 pandemic has transformed almost every aspect of life. From the way you shop for groceries to Zoom meetings, the world has been adjusting to its “new normal” for the past two years — and the automotive industry is no different.
Fewer drivers are going into dealerships, and more are looking and even buying directly online. If you intend to purchase a vehicle in the next year it is wise to understand this new landscape to be best prepared.
Will traditional car dealerships become obsolete?
Simply put, no. Car salespeople and the inflatable tubes dancing outside dealerships won’t be gathering dust anytime soon. But the days of crowded dealerships are no longer.
Car dealerships are in a major transitional period as they try to catch up with the decline felt in the wake of the pandemic. Dealers are recovering from both fewer drivers on the road from initial stay-at-home orders along with current declines due to inflation and the global chip shortage.
Buying a vehicle has always been an expensive process, but over the course of 2021 it has become even more costly. The month of October was the sixth month in a row that drivers saw record high price tags on new cars. Wholesale prices for used vehicles rose by 4.9 percent in early November, according to Cox Automotive.
The increase in prices and chip shortage has also greatly impacted the way dealerships are selling cars in another way. Used cars are currently in very high demand. Fewer cars being made and higher prices means more drivers are seeking used cars, and dealerships must shift to meet that need.
Online buying is in
It feels as though you can get anything right to your door with a few clicks. Apps like Uber Eats and Instacart have changed the way that consumers make everyday purchases. Unsurprisingly, the car market is finally catching up with this trend.
The typical car buying experience hasn’t had a major makeover in many years, and consumers have become accustomed to the drawn-out process of getting a new or used vehicle from a dealership. But as safety regulations still remain inconsistent due to COVID-19, many dealers had to follow suit with changing technology and embrace the expanding online market.
This shift into online car buying is not a completely new idea. Lots of local dealers have had online marketplaces available for customers to look at inventory before arriving at the lot. But the online car shopping experience has become much more in-depth as of recent.
In early October 2021, Hyundai announced a partnership with Amazon which gives drivers access to a virtual showroom called Hyundai Evolve. Your vehicle still won’t arrive in an Amazon box — once you find the perfect model and trim, the site will connect you to a local Hyundai dealer.
If an at-your-doorstep experience is more your style, Carvana is another retailer that is exploring an almost fully online car shopping experience. These are both the first of many online options that will gain ground in the coming years.
Haggling is (mostly) out
Low stock means that the past of negotiating for the perfect price is not as integral to the buying experience. With fewer cars available to buy, fewer drivers are negotiating for their perfect price because they’re just happy to drive off in a new vehicle at all.
But that doesn’t mean you should throw out the idea all together. You can often negotiate dealer extras — like paint protection, rust proofing and VIN etching — to push down your out-the-door price.
The chip shortage
If you have been on the hunt for a car over the past few months, you’re likely familiar with the semiconductor shortage. The cause of this shortage goes back to the start of 2020 when both production and consumer demand for the vehicles halted due to COVID-19. These chips are not just used for vehicles, so as more people were working from home, the focus shifted from vehicles to more personal and business technology.
Unfortunately, the waves from the chip shortage will continue to impact both dealers and consumers in 2022. The supply available is struggling to keep up with the demand from drivers. Simply, a lack of vehicle inventory has led to an increase in vehicle prices.
It will take a while for dealers to catch up with the demand, which, as mentioned earlier, has led to an increase in drivers flocking to used car options, and simply waiting for conditions to improve. But even with some dealerships seeing an increase in profit, many lots still sit empty. There are fewer vehicles available for sellers to sell so the market is competitive.
But there are still ways that you can drive away satisfied even as the chip shortage continues to impact available vehicles: Take advantage of online car shopping.
4 ways to use online car shopping to your advantage
Online car buying is still relatively new, and it requires a bit of learning. While some advice falls in line with traditional car shopping, consider these tips when skipping the showroom floor and going online to shop for a car.
In person or not, doing research to find the right vehicle is the first step in the car-buying process. Consider what factors matter to you most: the size of the vehicle, fuel economy or even the style and color. While you might not be able to explore your new ride in person, YouTube car tours are a great resource to see the specifics a vehicle has to offer.
2. Set a budget
After you set your sights on the type of vehicle that you want, it is important to figure out how much you’re willing to spend and set a budget. Finding this number takes some additional work but is much easier to do without a salesperson pressuring you. Take advantage of being home and consider all contributing factors, such as your salary, fuel, insurance and additional vehicle costs.
3. Check local inventory
Another advantage to shopping for your vehicle online is the option to check local inventory prior to going to look in person. This can be done in a few ways. Look at specific dealers in your area — search Toyotas sold near me or use websites like Edmunds or TrueCar. This will also help in your negotiations because you’ll have a better grasp of the price landscape for your dream car.
4. Chat online with salespeople
Negotiation can be one of the most intimidating aspects of the car-buying experience, but when you’re sitting behind a computer screen it is much easier to haggle for the price you deserve. Most of the online marketplaces you will encounter will have a chat option, use this as a space to ask the right questions. Focus on being firm, and share information you found while checking local inventory about competing price options.
The bottom line
It’s clear the car-buying experience has shifted for both the dealer and the buyer over the past two years due to a combination of factors — global pandemic, chip shortage, supply chain issues, growing technology. But with or without the pandemic looming as we venture into 2022, it is important to remember that a refresh in the industry is taking place, and it is bringing increased accessibility and transparency to the driver.
So even though it is unlikely that the familiarity of driving up to a car lot will disappear completely it is still best to prepare to shop online where you can expect to save both money and time.