Startups Fail to Beat the Car Salesman; Now Catering to Them

Bloomberg writer Gabrielle Coppola reported yesterday that, “The auto dealer — around for more than a century and viewed almost as negatively as members of Congress — looked like a ripe target for disruption when retailing moved online. Now that startups have tried and failed to beat the car salesman, many are taking a different route: catering to them.

“After watching predecessors like TrueCar Inc. and Ford Motor Co. stumble in their attempts to bring more Amazon-like e-commerce to car shopping, a new wave of auto finance upstarts has emerged. Rather than fight a dispersed and politically-connected dealer industry, they’re bringing the country’s 17,000 new-car dealers into the digital age, meaning consumers aren’t going to be bypassing the dealership to buy new rides anytime soon.”

The article noted that, “‘The market is so big that there’s nothing preventing someone from creating a new dealership model, but I want to go after the biggest part of the pie, which is how consumers buy cars today,’ said Kevin Singerman, founder of AutoFi, a two-year-old San Francisco-based startup that began piloting its financing software with Ford dealerships this winter. ‘That’s a much more attractive opportunity.’

“Almost 20 years after the internet brought price transparency to the U.S.’s almost $1 trillion-a-year new car sales market, several steps of the shopping process have migrated online. But as buyers turn to Kelley Blue Book and for price comparisons and Consumer Reports for model reviews, they remain unable to finish the car-buying process without a visit to the dealer. The average consumer visited about 2.8 dealerships before buying a car in 2016, compared to 3.5 in 2012, according to JD Power & Associates.”

Ms. Coppola explained that, “AutoGravity makes a ‘white label’ version of its app that dealers can roll out with their own branding. It allows shoppers to pick a car, find a dealer and apply for credit approval all from their couch. AutoFi’s software — which it sells to dealers — also lets shoppers apply for financing from their phone before going into a dealership to sign the paperwork. Both make money by charging dealers and lenders a fee once a sale goes through.

“‘It feels nice being able to go through the loan process without having to dress up and go down to either a bank or heaven forbid the dealership,’ one AutoGravity user, Justin Turpin, wrote in a review on the Google Play app store. ‘Of course once you do get the loan you have to put your pants on to get the car.'”

This entry was posted in Start-up Company Law. Bookmark the permalink. Both comments and trackbacks are currently closed.