The Savvy Shopper: eBay Deal Could Bring GM into the New Millennium
As it emerged from bankruptcy GM announced it is considering selling new cars on eBay.
Car dealers have always had a love hate relationship with the internet. Mostly hate.
In 2000 when the internet was first sending ripples of terror through the car business, dealers fought to beat back the transparency that the internet brings to the buying process. A few years later, at a NADA conference, dealers talked smack, bragging how they had repelled the attack and how "all roads still lead to the dealership."
But now a humbled GM, reemerging from a speedy bankruptcy last week, announced it's working on a deal with eBay Motors to sell its new cars on the internet. The cars would still be delivered by local dealers.
Is this a path to profitability for General Motors? Or just lipservice to a generation of young buyers who currently get their books, music and movies with just a coupla clicks.
I think this could be a smart move for GM. Here's why.
What people hate most about car buying is the uncertainty of deal making. The biggest question is: Am I getting a good deal on this car? Or am I getting screwed?
Edmunds.com has tried to remove this doubt by creating True Market Value pricing. But even with this handy tool buying a car is so complicated it's easy for a skilled car salesman to take a chunk of cash somewhere else in the deal.
The problem is that there are so many parts to a car deal that it is basically beyond the ability of the ordinary shopper to keep track of them all. At some point the consumer just disconnects and agrees to the deal.
Furthermore, if the deal is being worked in a cramped car lot sales office, with pressure from a salesman, his closer and the sales manager, this "team" will always win. Once the buyer is beaten into submission, he shuffles off to the finance and insurance office where the F&I guy works him over for any remaining money he still has left. He is sold extended warranties and service plans along with fabric protect and paint protection.
Now consider an eBay transaction. First of all, the demographic of the eBay shopper is someone who is web savvy. If you're shopping on eBay, open another browser and do your research at the same time. Compare prices. Shop for financing. And you do all this at your home rather than sitting passively across from a key-clicking salesman who takes a scalpel your family finances.
Certified pre-owned cars are already available on eBay. So it's hard to see that this would be a panacea for buyers. Still, it might bring transparency to what is currently a murky process for most consumers. And, if it keeps buyers out the showroom, and out of the finance and insurance office, and allows them to close deals at home, they will have a fighting chance at getting a good price.
eBay might help GM clean up the sales process. Now, let's hope that the General can offer strong cars that consumers want to buy. Put these two things together and they could have a winning combination.
- Posted by
- Philip Reed July 13, 2009, 1:48 AM
- Permalink
- Categories:
- Car Buying, Car Loans and Financing, Car Negotiating, Selling Cars, The Savvy Shopper, Vehicle Incentives and Rebates
- Technorati Tags:
- car sales, certified pre-owned cars, eBay, finance and insurance, GM, internet, negotiating, TMV
Is a "mellennium" anything like a "millennium?"
funny
If this becomes huge and I were a car dealer, I'd get ride of my showroom (and salesmen). Want to test drive a car? Do it somewhere else! Not having these expenses will let me undercut the guy that does and you'll wind up buying from me anyway.
Yea, I know this happens to some degree anyway, but this would take it to another level.
I'm sure that's where this is eventually headed, fewer salesmen, lower prices, less rip-offs for consumers.
Phillip, where are we going to test drive our vehicles? I really don't want to make my purchase based only on (internet) magazine reviews.
NADA put out a press release a few days ago that said "The National Automobile Dealers Association will continue to pursue legislative relief (H.R. 2743/ S. 1304) to protect state franchise laws and other relief for those GM dealers adversely affected by this process."
Are they gonna love eBay getting into the new car biz? eBay Motors is probably already killing them with the used car market, even though most of the listings now are from dealers.
Most all the states have dealer franchise laws that are stacked in favor of old fashioned brick and mortar car dealers.
Truthfully, if it weren't for all of the franchise laws protecting dealerships, we would be able to truly buy a car on the internet by now. I think you would still need a car dealership of some sort for the test drive and delivery part, but they could really cut back all of their overhead and stop having so many cars in stock. And they could do all of this on a tiny lot because they no longer have to house 100+ cars.
They could keep a few "demos" like one car of each trim level for people to test drive and get a feel of, and then you would just order the exact car that you want and they would custom build it for you.
Truthfully I see it as a benefit to the dealerships to cut out all of the negotiation stuff. Most people hate car dealerships and negotiations. Just sell cars at MSRP like everything else we buy in stores. No more gimmicks, no more having to slip profit in at other places, no more slick car salesman that no one trusts. But, at the same time, the dealership is actually selling the new car for MSRP and not having to take a loss on the car sale and make up for it with financing.
Sure, some people will be paying more than they might have in the old model. But I think the consumer would like it more just because it would take away the confrontational part of buying a car.
It's been a long time coming in my opinion...