Your Next Car Purchase May Be Online, Says eBay Motors

Would you buy a car online without a test drive, or even having seen it in person?

OK, maybe a new car from a well-known dealer.

But what about a used one, from a seller you have never met?

A growing number of stakeholder groups across the automotive industry—led by eBay EBAY +0.00% Motors and BMW—are betting that you will.

Why?

Price is certainly one reason. It can be significantly cheaper to market a new or used vehicle online rather than maintain the expense of a fully functional automobile dealership or car lot. These reduced costs can be passed on to sellers in the form of lower prices.

Selection is another big advantage of online car selling. The ability to merchandise vehicles from multiple dealers and/or sellers in one place creates a convenient one-stop shop for buyers. It also changes the dynamic of haggling over the price of a vehicle into electronic communication, which is more comfortable for today’s car-buying demographic, which is increasingly younger and female.

Furthermore, mobile technologies will also allow customers to take a “virtual test drive” if they would still like the experience of sitting behind the wheel before they make a purchase decision.

Would you buy a car online without a test drive, or even having seen it in person?

OK, maybe a new car from a well-known dealer.

But what about a used one, from a seller you have never met?

A growing number of stakeholder groups across the automotive industry—led by eBay EBAY +0.00% Motors and BMW—are betting that you will.

Why?

Price is certainly one reason. It can be significantly cheaper to market a new or used vehicle online rather than maintain the expense of a fully functional automobile dealership or car lot. These reduced costs can be passed on to sellers in the form of lower prices.

Selection is another big advantage of online car selling. The ability to merchandise vehicles from multiple dealers and/or sellers in one place creates a convenient one-stop shop for buyers. It also changes the dynamic of haggling over the price of a vehicle into electronic communication, which is more comfortable for today’s car-buying demographic, which is increasingly younger and female.

Furthermore, mobile technologies will also allow customers to take a “virtual test drive” if they would still like the experience of sitting behind the wheel before they make a purchase decision.

Dealers also see value in using platforms like eBay Motors to better manage their inventories.

This aligns with Frost & Sullivan research showing that both automakers and their franchised dealers are embracing the potential of the online, virtual showroom. For OEMs, it offers an opportunity to increase the average sales margin per vehicle, particularly on small cars, and to penetrate new markets where there is a lack of physical infrastructure to support vehicle sales.

BMW operates a virtual showroom on the Chinese site Tmall.com. China has become the world’s largest automobile market, and its dense urbanized environments and youthful, tech-savvy population are ideally suited to this sales model. The automaker stands to reach millions more upwardly mobile Chinese this way than through a physical dealership.

In the U.S., auto dealers are expected to sell more than 17 million new vehicles and 45 million used ones. The market potential of moving even a small percent of those sales online could reach into the trillions of dollars.

There are already several peer-to-peer used car sites operating in U.S. cities that are offering to broker sales between sellers and buyers, with a range of enabling support services that include mechanical inspections and a test drive to validate the condition of the vehicle.

For now, security is the main obstacle in attracting more customers online. To this end, online sellers are offering guaranteed condition, warranties and no-haggle return policies that meet or exceed auto industry standards. Menon pointed out that “purchasing auto parts via the Web is becoming more and more popular” and to succeed in today’s marketplaces, “retailers must adjust to welcome the influx of consumers seeking to purchase online.”