COVID-era car buying habits here to stay

When we think of shopping in 2020, there isn't a clear distinction between doing it online or in person. While e-commerce has slowly evolved over time, stay-at-home orders as a result of COVID-19 have expedited the process for many long-established bricks-and-mortar businesses to provide complete end-to-end online experiences. Transactions that might have sounded cumbersome to do online just a few years ago, such as adopting a pet or picking out an engagement ring, are standard online experiences today — and the auto industry is no exception.

Human-to-human interactions have been integral to car buying because of the significance of the transaction and the size of the merchandise. People like to try before they buy, especially when it's one of the biggest purchases a person can make. Now shoppers have access to things such as at-home test drives you can schedule online, and we're seeing the traditional showroom experience become less of the go-to.

These combined factors — evolving consumer preferences, innovation by the auto retail industry and a need for contactless transactions — have created an inflection point where, from this point on, auto retail will be largely online. This is further confirmed by COVID-19-specific research fielded by Cox Automotive that found two-thirds of new-car shoppers are comfortable completing the entire car-buying process online. The relationship-driven nature of the industry is not changing — with new online solutions, dealers and shoppers can form relationships even earlier in the process.

Typically, the first step in purchasing a vehicle is browsing for options, and new tools such as online video chat, to bring a customer closer to the dealer, are helping to move this step completely digital. We see this in other industries as well. Skin care companies provide online quizzes that match customers with products to fit their needs or allow them to upload photos to see what the product would look like on.

In addition to helping consumers find that right option, digital solutions can also help dealers identify potential buyers. Social media targeting is a great example of how multiple industries are generating quality leads during this first step of the process while remaining within the tight budgets this difficult time requires.

Once the consumer has found options that work, a test drive is almost always essential before purchasing a vehicle. We know people need to feel the car and kick the tires, and while this part of the process is impossible to move completely online, being able to schedule test drives online is a great start. At-home test drives are increasingly becoming an option in the auto industry, reflecting the trend of companies offering a free first month of their products for potential buyers. In the same vein, video walk-arounds are gaining momentum to eliminate the amount of time spent at the dealership.

Vehicle trade-ins and financing are arguably two of the most complicated components of the car-buying process that in the past have prevented a simple "add to cart" and "check out" option. Now, getting a trade-in estimate is as easy as inputting your vehicle information and clicking a button for an instant offer. Financing can also be done quickly and easily through online calculators that break down costs. Interestingly, financing also is going mainstream in e-commerce with services that allow consumers to make monthly payments on products rather than completing an entire transaction at once, demonstrating there's a market for e-commerce financing beyond the auto industry. As consumers get more accustomed to financing with a click of their iPhone, they are beginning to not only get comfortable with doing the same for a larger transaction such as a vehicle, but they expect the same speed and convenience that most online finance and insurance options can't yet provide.

We're also seeing more successful e-commerce programs borrowing the trade-in model, whether for fashion or laptops, opening the floodgates for more usage and even a preference for the sophisticated digital vehicle trade-in process available today. Trading in a car is by no means as simple as trading in clothes, but with development in auto retail technology, it's making significant advancements.

Dealers putting stock into digital retailing solutions such as the ones mentioned above will continue to see the benefits as time goes on and more consumers seek a virtual car-buying experience, especially with more than 60 percent of shoppers wanting to do more of the purchase steps online compared with the last time they bought a vehicle.

The results of having these tools are staggering. For example, independent dealers who have digital retailing solutions saw 73 percent of their customers completing steps of the car-buying process online, whereas independent dealers who don't have digital retailing solutions only saw 17 percent of their customers doing the same.

Now that customers have a taste of how seamless and at their fingertips the car-buying process can be via digital tools, it's not likely we'll see a major shift back to pre-COVID-19 shopping. Consumers are accustomed to on-demand shopping, no matter the product, and they likely will not give up that convenience in a post-COVID-19 world. If enough dealerships are offering digital tools, then shoppers will continue to have the options they are expecting after the pandemic. And while the auto retail industry was somewhat of a laggard, much of the technology in use today is at the forefront of e-commerce innovation.

The pieces were in place before the pandemic, but the situation created an opportunity for dealers and customers to embrace a digital-forward future for auto retail.