Technology 8 min read

Why Car Dealerships Will be Extinct by 2025

Car dealerships are the bane of many a car buyer's existence, but now they may be becoming a thing of the past. | Image by Avigator Thailand | Shutterstock

Car dealerships are the bane of many a car buyer's existence, but now they may be becoming a thing of the past. | Image by Avigator Thailand | Shutterstock

While self-driving cars are not on the road today, that future isn’t too far away.

Many car manufacturing companies such as Volvo pledged to go all electric before 2025. Many of those same companies are also developing their own autonomous vehicles.

Other companies such as Tesla, BMW, and Lexus have a pilot or fully-fledged subscription services. That’s right: you don’t even need to buy or lease a car anymore. You just engage in a subscription which functions like a long-term lease with full warranty in some cases.

You can even have cars delivered to your doorstep with services like Carvana.

Yet, despite more than 80% of Americans not liking them, car dealerships persist. In fact, a recent study suggests that traditional car dealerships may be adversely affecting the adoption of electric cars, too.

So, with all of these reasons to move forward, why are car dealerships still around today?

image of computer screens with hands coming out of them for article Car Dealerships: why are They Still Around and What's Eliminating Them?
People are buying everything online today from clothes to houses, so why not cars? | Mediamodifier | Pixabay

Why Brick and Mortar Stores are in Trouble

Big box retail can’t compete with e-commerce in terms of overheads, staffing prices, and supply chain. But, when you add automation into the mix, the odds of survival become even murkier. People prefer more direct sales these days.

That’s why things like brand loyalty matter in 2019: this trait can make or break a business’s future. But there are a few more things brick and mortar companies can do to hedge their bets.

Apart from inspiring extreme brand loyalty like Target has been able to do, companies can become early adopters. Fully embracing new technology means that you can be at the forefront of it instead of playing catch up.

Perhaps this is why Walmart decided to adopt the grocery store robot from Bossa Nova.

Real life shopping experiences are already shifting toward “experience” over “shopping”. You can read here about “town squares” and how luxury brands may become the only brick and mortar stores in the 2020s.

But, unless they catch up with the times, car dealerships may not survive the coming wave of automation and e-commerce.

image of car salesman pointing to a car for article Car Dealerships: why are They Still Around and What's Eliminating Them?
Car dealers, to the joy of many, may soon be relegated the category of milkmen and door-to-door salesmen | Pixabay

How People Approach car Buying in 2018

You know the drill: walk in, get greeted by some smiling dude in a wrinkled suit. You opt to take the free water bottle they offer you and the car make-branded pen. Then, the salesperson proceeds to tell you all the reasons why you absolutely need any car you walk by.

The process of buying a car can be stressful for reasons like this.

You can easily get swindled by a motivated salesperson looking to make a commission. You could just as easily get overwhelmed by all of the cars, information, and dollar signs.

Moreover, it can be difficult to understand how auto loans work. There are a ton of variables that complicate the modern car buying process.

Car dealerships with their humongous lots, brand ambassadors, and sales-driven service don’t fit in the world of 2018.

Everything is on demand, from information to food to entertainment and communication. So that means that someone can do all of the research about a car upfront.

When a salesperson tries to give them the “elevator pitch”, the person already knows the true facts behind the veneer. So why should they bother listening to that and going through that trouble when they could just buy a car online instead?

Here are the things eliminating the need for car dealerships:

  • Near instant access to relevant information
  • Delivery options for products and services
  • Variety of new payment forms including cryptocurrency
  • More car buying options than ever before
  • People’s over-saturation with advertising and sales-driven content

But you also have companies like Carvana and Yoyo, as pictured below. Even Zipcar functions similarly to a subscription service.

There are more things at play, however, than just millennials and business competitors.

Singular Ownership vs Shared Wealth

Let’s get into some coffee table philosophy here with the guy nobody remembers: Mill.

John Stuart Mill developed the idea displayed in a classic Star Trek quote.

You might remember that moment in Star Trek II: Wrath of Khan when Spock tells Captain Kirk that “the needs of the many outweigh the needs of the few.” That, my friends, came from one John Stuart Mill and you might recognize it as Utilitarianism.

Some of you might see where I am going with this thought experiment, so stay with me.

You also need to know about populism which can, in fact, mean a variety of things. But think of it as the common people vs the elites.

The last concept you need to incorporate is the idea of shared wealth.

We all share the Earth, the air, the sea, dinner, seats on public transit, etc. Why not expand this to other aspects in life like purchasing a really expensive 3D printer or handling car maintenance?

You can see these concepts reflected in things like coworking spaces, as well.

image of people in a coworking space for article Car Dealerships: why are They Still Around and What's Eliminating Them?
The conventional idea of an office is dying, and with it may go the idea of privately owned cars, too | Image by | Shutterstock

Given how integrated data, information, and almost everything is in today’s world, it makes sense that people should share the costs or weight of things, too.

Car subscription services and direct car sales benefit both the car manufacturer and the car buyer, so it’s a no-brainer. It also eliminates the need for leases, regardless of the term. You can still swap cars for variety or stick to “Old Faithful” in a subscription model.

People can also still own cars (for now), but not many people necessarily need to. Unfortunately, direct car sales don’t get much support from the entrenched car dealership system in the U.S.

How car Sales Rules Influenced car Buying Practices

A car — especially a luxury car — has always been a sign of wealth in the U.S.

I still see people driving Range Rovers occasionally and I wonder how much longer they have on their warranty and how many times they had their car serviced in a single year. If Doug Demuro’s experience is any indication, the answer to part is quite a few.

The maintenance cost on certain cars can be insane, but subscription services help to absorb some of this cost from car drivers. At least, the ones from dealerships like Tesla or BMW can do that.

For things more like car rental services like Zipcar, that’s a different story.

Tesla showed the world that people will buy cars without the unnecessary aspect of a car dealership. “Selling” directly to consumers makes so much more sense in 2019.

Despite this, the National Automobile Dealers Association (NADA) didn’t approve of this new sales technique back in 2013. It goes back to how car sales have historically functioned.

Dealerships get independently franchised in most states because it’s required. Initially, car manufacturers preferred this in order to more quickly grow their reach and potential sales numbers.

But think about that in a world where you can get a flat screen TV delivered in an hour.

When Will car Dealerships go Permanently Extinct?

People still deal with car dealerships on a regular basis these days. But the ways in which people find themselves at car dealerships is no longer the same.

You don’t see a commercial or find out from a friend; most people look things up on their smartphones. J.D. Power and Associates found that 53% of internet shoppers looking for automotive information use mobile devices.

The study also found that 87% of Americans don’t like some aspect of car dealerships. What’s worse, 61% feel that the car dealership is taking advantage of them.

With the power of the Internet, cold car dealership calls are just nuisances now.

No one needs a salesperson to tell them about the car specials because we can see them online. And no one needs someone to “sell” them on a car if the person has done the research and determined that this is the car they want.

Direct car sales just make sense in an age powered by information and connection. Car dealerships might not be extinct yet, but their days are definitely numbered.

Read More: Tesla To Unveil Its Model Y Next Week

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Comments (16)
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  1. Profile Image
    Anthony Crosier March 16 at 12:24 am GMT

    Big fish eat the little ones. Today the small dealers in town become a dying breed and people making their purchase without ever setting foot in the dealership.

  2. Profile Image
    Derrick Vanwyk March 16 at 1:01 pm GMT

    These shifts might seem too daunting to happen so fast for just a matter of 7 years. I guess, the dealership especially the small one are starting to panic. Salespeople have to evolve or else they would be replaced by in-vehicle tutorials that are simpler online processes.

    • Profile Image
      Claire Smith March 17 at 5:38 am GMT

      Are we back 60 million years ago when dinosaurs are about to disappear?
      I’m sure a desperate move will be made by this industry. They will not allow this to happen.

      • Profile Image
        Derrick Vanwyk March 17 at 7:17 am GMT

        Personally, I prefer to purchase things online. A customer wants always prevail.

        • Profile Image
          Claire Smith March 18 at 5:24 am GMT

          You always get value for money at the shop. Most of the time products online are not as good as what is posted on their website. Car dealership offers more option.

          • Profile Image
            Derrick Vanwyk March 18 at 6:02 am GMT

            It will basically be cheaper to ride-share than own a car.

          • Profile Image
            James Atherfold March 03 at 9:55 pm GMT

            If you order a car online, you get exactly what you want. If you buy a car at a dealership, you get what the salesman wants to sell you.

  3. Profile Image
    D Imek June 18 at 8:18 pm GMT

    I for one, cannot wait until car dealerships are extinct, good riddance!

  4. Profile Image
    Jared Stanonis September 12 at 12:57 am GMT

    Many people want to see and drive a car before making such a large purchase. Sure technology will streamline the process, but it won’t totally replace it. People research real estate online, but usually reach out to a realtor before closing a deal. Some things will always remain. We all still eat with forks and spoons! Lol.

    • Profile Image
      manuel furtado November 26 at 3:58 am GMT

      Jared is 100 percent correct,I have been hearing this same story since 2000 when the internet was exploding in the car industry and little has changed,with the exception of dealerships adding a internet sales team who make appointments for salespeople to meet with customers.

    • Profile Image
      eric Rotermund April 04 at 4:21 am GMT

      It’s called a rental. I would rather pay to not have a scumbag trying to rip me off
      Dinosaurs didn’t know they would become extinct.
      Why would you use a realtor and not a lawyer for real estate transactions there is a Fiduciary responsibility there. Sales agents are basically accountable to nobody.
      I have half a mind to bring a lawyer to a car dealership.

      Car dealers have no value they are middle men who provide zero value.
      What other things require such a model

  5. Profile Image
    robin young January 07 at 3:57 pm GMT

    I personally disagree with most of what this article is trying to push on you. Just another popcorn piece that is trying to be edgy and portray some sort of shock and awe to get you to read it. The writer prefers to quote star trek rather than any actual relevant data that supports her claim. We already know that people tend to shop more online these days or that the majority of people don’t enjoy the sales processes used during the car buying experience already. Dealerships and manufacturers are going to extreme lengths to be very forward and open about information these days and are trying their best to change with the times. As one person already noted, they have teams now set up to deal with online customers. In my personal experience and anyone with sales experience would relate, we are not out to offer horrible customer service. It is counterproductive period. Customers who do get horrible service tend to bring it on to themselves by simply being horrible customers. I know it hurts to hear this but it’s the truth. It is important to be informed when making a car purchase and all the information is out there and easily accessible.

    • Profile Image
      eric Rotermund April 04 at 4:29 am GMT

      Yeah blame the customer. If you were honest you would just sell a car with pure transparency declare,
      Exactly the profits you earned from the transaction.
      From all sources or just charge a fixed fix for your time.
      Like you do for repair.
      Dealers are scumbags and always will be.
      I would put them all in prison if I could.

  6. Profile Image
    James Atherfold March 03 at 10:03 pm GMT

    If car dealerships hadn’t gotten themselves such a bad reputation, then they may have survived, but ultimately their greed and lack of morals over the years will undoubtedly prove to be their downfall.

    • Profile Image
      eric Rotermund April 04 at 4:33 am GMT

      Yes very true I’ve never not been dealer scammed.
      I’ve made plenty of paper shufflers at dealers go purple from rages that they didn’t get to fleece me .

  7. Profile Image
    eric Rotermund April 04 at 4:34 am GMT

    Nothing worse than a car salesman

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