Online car sales have been gradually ramping up over the past few years, even though the data says they have some way to go before they overtake those of physical car dealerships. Right now, less than 10 per cent of new and used cars are purchased entirely online, and less than 30 per cent of enquiries for used vehicles are generated online.
Obviously it’s a subject that we have a very deep vested interest in here at RAW2K, as the UK’s leading online platform for salvage car auctions and used car auctions. And it looks like there are big changes on the horizon, with a general consensus emerging that around half of all car sales could be made online by 2030. So what’s going on – and should dealerships be worried?
Who’s suggesting this?
Philip Nothard, the insight and strategy director at Cox Automotive, predicts that by 2026, online sales could make up 42% of the market for new and used cars, rising to 56% by 2030. Simon Harris, head of valuations at UK Vehicle Data, agrees. He says that he “wouldn’t be surprised” if a fifth of vehicle sales transactions in the UK could be online within five years, with sustained growth throughout the decade.
Both of these predictions are broadly supported by a November 2021 survey by KPMG, which surveyed 1118 UK motoring executives. If found that the majority anticipate that cars will mostly be sold online by 2030, particularly electric vehicles (EVs), which could make up 70 to 100% of new vehicle sales in western Europe. Additionally, 59% of respondents believe that online sales will become the norm by the end of the decade. When solely focusing on answers from global bosses, that figure rises to 78%.
The biggest factors driving the shift to online sales
The shift to online has arguably been a long time coming, but a couple of factors in particular are currently propelling it even further into the spotlight.
Pandemic
The COVID-19 pandemic is without question one of the single most influential factors. The COVID lockdowns have played a huge part in accelerating the trend toward online retail, including car sales. As Northard notes, car buying is more complex than typical retail transactions, but the move to online platforms is finally gaining significant long-term traction.
In his own words: “The pandemic has undoubtedly influenced current online buying figures due to consumer caution towards face-to-face interaction, lockdown restrictions, and a 'click and collect' only environment."
Convenience
Compared to how the internet functioned 20 years ago, it now serves as a notably more sophisticated selling platform – with detailed information, images, and videos of cars for sale, all of which makes online car shopping more convenient for consumers.
"If [customers] have a positive first experience [online], they will not go back to the old way of car shopping," commented Mr Harris. “They are already used to buying valuable items in this way, and now it's just a small step to try it for changing their cars. The convenience of cutting out multiple showroom visits is priceless to many people.”
His views are backed up by Deloitte survey of the general public in September and October 2021, which found that 47% of respondents cite convenience as the main reason for preferring online car sales. “Speed of transaction” and “ease of use” were also some of the most popular reasons mentioned.
Electric cars
There’s a good reason why electric cars are likely to make up such a significant proportion of online car sales – they’re already pretty far ahead. That’s largely because electric vehicle models typically have fewer options, reducing customer uncertainty and making online purchases more appealing.
A digital-savvy generation
Younger consumers, in particular, are more willing to buy cars online, with 34% of 18-34 year olds prepared to do so compared to only 9% of those aged 55 and older. Essentially, because they’re more comfortable with online transactions, they’re driving the transition to online car buying. And with young digital natives leading the charge to shopping mainly online, even wealthier age groups are embracing online platforms for larger purchases like cars.
What could the future of online car sales look like?
To be honest, opinions differ at the moment. However, dealers can take heart in that the most likely scenarios don’t necessarily mean that dealers become entirely redundant.
Philip Nothard at Cox Automotive, for example, suggests that the onset of the agency model for many car manufacturers will play a key role. In this model, the car dealer effectively acts as the 'agent' for the manufacturer, handling test drives, but the customer buys the car directly from the manufacturer. This could lead to quicker adoption of online buying for new vehicles. However, in this proposed future, it's worth noting that the complete end-to-end transaction will still require some interaction with the retailer.
Simon Harris from UK Vehicle Data agrees that a hybrid approach is the one most likely to evolve over the next few years. Many people may make their purchase decision before seeing the vehicle in person, relying on some kind of return guarantee if they're not satisfied within a few days of delivery. However, he predicts that the traditional in-person transaction process will remain for those who prefer it.
The KPMG’s automotive executive survey from before this is generally positive too. Even though more the 50 per cent of respondents feel very worried about supply shortages, the survey’s findings have revealed a widespread optimism within the industry. The majority of executives is also fairly positive about the industry’s growth, with 53 per cent of them feeling confident.
Whatever the future does end up looking like though, you can always count on us here at RAW2K to continue offering you the very best deals on a a huge range of salvage cars to choose from in our online car auctions, including not just models from the likes of Ford and Volkswagen, but also other world-famous brands like Mercedes, Honda, and Peugeot. Our auctions are refreshed on a daily and weekly basis, so there are always bargains to be found. Why not take a look around, and see what you can find?
