Month: August 2015

Design Concepts for Online Car Buying

In my last article, I made a distinction between online car shopping and buying. Shopping is an iterative process in which the customer settles on a vehicle, with only a rough idea of the price and terms. For many customers, this is sufficient. They will then proceed to the traditional dealer-driven process.

In this article, I will present tools and techniques to support online car buying.  As a software designer I feel that, fundamentally, this is something we should be able to do. If the tools exist in the dealership, then there’s no reason why they can’t be on a consumer site. This was the subtext of my earlier article, Dealer Systems in the Consumer Space.

I agree that customers should visit a showroom for help in choosing a vehicle, and I agree that two-thirds of them (that’s the survey figure) will prefer to do the paperwork there. On the other hand, why shouldn’t the customer have the option to complete some or all of the paperwork at home? I envisage a process driven by the customer, with support from the dealership.

We’ll start with a simplified process model based on task precedence, and then we’ll discuss the design requirements. I have a more detailed model based on data flows, but the precedence model is easier to work with. The flowchart below shows the required sequence of tasks, given their prerequisites.

Online PERTThe first thing you notice about this diagram is the number of deadlocks. You can’t be certain of the finance rate until you get an approval, and you need it to structure the deal. So, the sales desk must use a floor rate or do a pre-approval. Even in the dealership, this is an inherently iterative process.

Real-life business processes are never as clean as you would like. Still, I propose to streamline this one and hand it over to the consumer. Since we’re working from a precedence diagram, I’ll try to remember and discuss data requirements as we go along.

Choose Your Car

The customer may search the inventory of a given dealer, all models of a given OEM, or all dealers participating in an online search platform like Auto Trader. For our purposes, AutoNation is a giant dealer site, not a platform, because they control the inventory. This is an important distinction.

An OEM site may list all the vehicles they make, but must still search dealer inventories to find a specific unit. GM’s Shop-Click-Drive starts with selecting a dealer (an obvious concession to dealer pressure) whereas does a proximity search just as any platform would.

This question of whose inventory to search, and when, is not so much a process decision as it is a business model decision. That’s why I left “choose a dealer” off the diagram. For example, the difference between Vroom and any other used car platform is that Vroom takes the unit into inventory. Prices and policy are set by a single entity, instead of an aggregation of competing dealers.

The business context may vary, but the software requirements do not. Inventory search means model and trim selection, photos, zip code, etc. I seem to be permanently cookied in Farmington Hills, no matter whose search platform I use.


In the earlier article, I discussed adding an inventory search plugin to an online lending site. All of the high level tasks in our diagram already exist as components of various web sites and dealer systems. You could conceivably deliver the entire process using service orchestration.

Find Your Price

Once the customer lands on a vehicle, she has also landed on a price. A special task to disclose the price is needed because other dealers will undercut our online price. This is the most challenging part of our process, and I have written previously how I feel about it.   Here are some solutions:

  • Use no-haggle pricing. This is more practical with used cars, but new car dealers will come around eventually.
  • Join TrueCar’s conspiracy to “destroy the industry.” What the last guy paid for his MKZ is not the dealer’s intellectual property.
  • Do the haggling online, or by phone. For that matter, the customer can visit the dealership, take a test drive, haggle, and then go home to finish the paperwork.

Remember, our objective is to make the process available to the customer online. Nothing stops her from contacting the dealership for help.

Millennials are starting to express the fact that they’d like to do more shopping online. They’d like to connect that shopping to a buying experience…that needs to be quicker and more transparent.

Depending on the site’s business model, there are a number of ways to handle pricing. The trick is finding one that works for the customer, without alienating the dealers. By the way, an OEM is in a much stronger position to reform pricing than TrueCar is. The quote above is from Bill Fay at Toyota.

Protect Your Investment

Protection products are strangely absent from the shopping sites. When you put the process into precedence terms, selling a Vehicle Service Contract jumps right to the top. As soon as the vehicle is specified, even before it’s priced, you have enough information to quote a VSC.

Whatever sales approach you wish to implement – like, citing the total cost of ownership – is available early in the process. This applies to Road Hazard, Maintenance, and Appearance Protection, to name a few. My favorite sales tool for GAP must wait until the deal structure is known, but nothing stops you presenting the product at this stage.

Whose products to present is another question. If this is an OEM site, our choice of products is fixed. Let’s design for the worst case and assume a platform with a variety of dealers. In this case, we must store a profile for each dealer, as we would for a menu system, indicating the dealer’s slate of products.

Which sales approach is best for the online consumer? I’d be lying if I said I knew, because no one knows. I have some experience with menu presentation, and I am pretty sure that’s not the answer. I have also done some work with expert systems.

For the purpose of this article and our Millennial online customer, I am going to recommend a passive approach. In my next article, I’ll expand on passivity as a design theme. What it means for this task is simply exposing links to the products, including information about the chosen vehicle, and allowing the customer to educate himself. Also, bear in mind that as a commerce site, you should be doing A/B testing.

This question is really about navigation, and how to manage the customer’s experience. That’s where we’ll resume, next week.


Car Buying

Why Price Transparency Matters

About a year ago, the McKinsey report came out, Innovating Auto Retail. It looked at how traditional dealerships will fare in a world dominated by online shopping, and how the business model needs to change. McKinsey has some good ideas, which they tested using a simulated dealer network. In the simulation, one dealer in six had to close.

For online shoppers, the primary motives are convenience, the expectation of lower prices, and avoiding certain unpleasant elements of the sales experience at dealerships, such as “haggling over the price” – McKinsey

Recently, Auto Trader conducted a survey of modern buyer behavior. It is more dealer friendly, but it reaches some of the same conclusions. The core function of a dealership is to provide expert assistance in choosing a vehicle, and to do test drives.

What does not belong in a dealership is the hour-long F&I ordeal. Customers, according to the survey, are ready to leave after ninety minutes. Spending sixty of them in the box is a non-starter. The more of this process that can be completed online, the better.

Vroom No Haggle

One finding in the Auto Trader survey that differs from McKinsey is the assertion that customers actually prefer to haggle over price. I see an editorial like this about once a week, and I just don’t buy it. It’s obviously self-serving for expert sales people to insist that customers enjoy the process – even as they argue against price transparency.

My purpose here is not to make a moral point about Sales, but a practical one about F&I. Pricing is the key obstacle to completing virtually all of the transaction online. You have all of this time consuming activity around financing and products – backed up, waiting for the price.

I would suggest that the opportunity to play games with the sale price is not worth what it costs F&I in lost profits and efficiency. Someone is going to figure this out. Here are a few possibilities:

  • Use no-haggle pricing, like Vroom.
  • Use transaction prices, like TrueCar.
  • Do the haggling online, like MakeMyDeal.
  • Use some hybrid approach, like AutoNation.

AutoNation recently had a falling out with TrueCar, but they have always been a leader in trying to solve the pricing problem, probably because they are aware of the efficiency issue (and the CSI issue). I understand that many sales people still consider haggling to be an important part of their job. Times change.

Claiming Space on Consumer Sites

In my last article, I described a technique for extending traditional dealer functions into the consumer space. I used the metaphor of a land rush, with the extension feature claiming territory on one or more consumer web sites. This is part of a generic strategy, to update any dealer system and make it more relevant to the evolving world of online auto retail.


In this post, we will survey the consumer space, looking for opportunities to insert the various dealer system extensions. My plan is not to predict the future of online retail, but to show where these “plug-ins” may be placed today. Prediction only comes into play because we want to know how durable the relationship will be.

Sunnyvale Toyota is one of many individual dealer sites featuring the eLEND credit plug in. If you’re not clear on the plugin concept, take a look. Technically, this is an Iframe that passes control to the extranet formerly known as Dealer Centric. The site itself is by, and the dealer has chosen to delegate the credit process to eLEND.

B2C Diagram

I really like this technique, but that’s not the question. Credit systems are well represented on dealer sites, using a variety of techniques. The question is – where are the protection products? Pricing and presenting products on a dealer site is technically easier than doing a credit app. This is an obvious place to extend menu systems and provider networks.

A dealer site is not a good place to start desking, because the site is too far down funnel, and the process depends too much on pricing. A key advantage for the dealer’s desking system is the ability to include local taxes, fees, and incentives. We’ll talk later about how and why desking should be part of the customer’s online shopping experience.

A dealer site is also not a good place for opt-in CRM or, at least – as I wrote last week – not as good as an OEM site. People move around too much. Another thing to consider with dealer sites is that they will increasingly be dominated by shopping sites and consolidators.

You would think that specialist car shopping sites would offer the most functionality to their customers – and you would be wrong. That’s because they don’t own the inventory, and they don’t control the process at the dealership. It’s hard to initiate a credit app or sell a service contract on behalf of a heterogeneous dealer population. Auto Trader offers a link to a direct lender.

Even consolidator sites, like Sonic and AutoNation, leave the heavy lifting to their stores. They are better able to standardize process and systems than the other shopping sites, but they still have to work with different franchises and different captives. There is opportunity here for dealer systems to differentiate themselves by offering consumer-site features.

You would think that specialist car shopping sites would offer the most functionality to their customers – and you would be wrong.

Used car consolidators, like CarMax and Vroom, have much more flexibility. It is theoretically possible for these sites to offer a complete buying experience online. To me, that includes credit, desking, and products. Vroom wants to be “the Zappos of online car buying.” This brings me to that futurism topic I promised to avoid, and our next category … car buying sites.

I like to make a distinction between shopping sites and buying sites. Shopping is a nonlinear process, with rough ideas and estimates. Just look at all those asterisks on the shopping sites. Buying requires things to be done in a certain sequence, with exact values.

A shopping site is all about selecting and pricing a vehicle from inventory, and then turning over the lead. This means a variety of dealers with a variety of systems, and little opportunity to extend functionality toward the customer.

They may say “buy a car online,” but very few actually attempt a complete buying process. Vroom and ShopClickDrive are exceptions. Both use Route One for credit processing – and nothing for protection products. Buying sites, as they evolve, will be the Promised Land for dealer system extensions.

I was going to make a separate category for research sites, like Edmunds and TrueCar. For our purposes, these are the same as shopping sites, above.

Calculators and credit apps abound on the auto finance sites, and some of them are quite good. This is where you can “roll to amount financed,” for example, with current loan rates. I see untapped potential here, for desking, CRM, and product links. Plus, here’s an out-of-the-box idea – an inventory search plugin for the banks. It would look something like this, below. Bank of America already has the window. It’s just missing the car!


I include OEM sites even though they’re poor candidates for dealer system extension. The challenge with OEM sites is that they already have proprietary relationships with F&I partners. The Buick site takes you right to Santander, and the products on the Hyundai site are from Safe-Guard. Also, an OEM must consider all their dealers, so they can’t favor one system over another.

Your best bet here is to develop a generic interface, and then compete on the depth and breadth of your OEM integration. Dealer Track does this in the service department. If you know of anybody doing it in the front office, please let me know.

The table below summarizes the opportunity for extending dealer systems into the consumer space. There is no “official” taxonomy of auto retail sites. I chose these categories because they work well with the generic strategy.

Sites Table

Whether you are planning a strategic move into the consumer space, or just a new feature, I hope you find my analysis useful. You can’t beat the land rush if you don’t have a map.