Americans like instant gratification, certainly when it comes to their cars. Since the earliest days of the auto industry, most motorists have driven up to the dealership, finished negotiations and driven home in a new vehicle.
Whether it’s the result of the COVID pandemic or something else, that approach is rapidly changing, however. A new study finds that more than four out of 10 shoppers expect to preorder their next vehicle. And a sizable share of them will do so entirely online.
The approach does offer a number of advantages. Traditionally, buyers have had to settle for whatever vehicle a dealer has on the lot. Preordering lets a motorist precisely spec out the vehicle they want, down to the smallest options and paint colors. But there are some downsides, starting with having to wait, sometimes for two months or more, to take delivery.
Shutdowns and shortages
It’s probably not surprising that more Americans are preordering vehicles, said Cars.com, which highlighted a series of changing market trends uncovered by its new study.
COVID shutdowns, compounded by a global shortage of semiconductors, have left U.S. dealers seriously short of new cars, trucks and crossovers. According to industry data, there are currently only about 1 million vehicles on dealer lots, less than a third of what was considered normal this time of year.
While some new car buyers have switched to used vehicles, others have had to sit on the sidelines — reflected by the sharp slump in U.S. sales last year. But a growing number of motorists are now preordering their vehicles. About 41% of those who responded to the survey said that’s the route they plan to follow when buying their next vehicle.
The process used to be a challenging one, but more and more automakers are figuring it out, setting up websites that make it easy to preorder. Of course, customers also can work directly with a dealer. And, of course, orders eventually will be handed over to a retailer since — with rare exceptions — state franchise laws restrict manufacturers from selling vehicles directly to consumers.
Making it easy
That said, carmakers like Tesla, General Motors and Ford have been encouraging advance orders, especially when it comes to all-new products. Ford lined up several hundred thousand advance reservations for its new F-150 Lightning pickup after it was unveiled in early 2021. It just began converting early reservations for the battery-electric truck into actual orders, even though production isn’t set to begin until June 2022.
Preordering presents a number of advantages for car buyers and carmakers alike. A consumer get to precisely spec out the vehicle that they want, perhaps including rarely chosen options and colors, rather than settling for what’s on a dealer lot. Retailers tend to stock their showrooms with the most popular packages – one reason why you see so many silver, white and black cars on the road.
For a dealer, the switch to pre-ordering means they won’t have to carry as many vehicles in stock — reducing holding costs — even after factories get back to normal production. And, among other things, preordering helps automakers tune production to actual market demand, rather than having to guesstimate what to build.
Lasting changes
“We’re going to see lasting change resulting from the current biz conditions,” Dave Gardner, the executive vice president of U.S. operations for Honda, said during a media Zoom call last month. That includes not only a rise in preordering, Gardner added, but a shift to buying online.
That trend has been building for several decades, though, until recently, it was largely limited to doing research before going to a showroom. Now, Cars.com found, “38% of current car shoppers expect to complete the entire car-buying process online, with another 38% intending to do all the paperwork online but purchase their vehicle in person.”
Until recently, many dealers were ambiguous about online shopping. Often, they’d assign their greenest salespeople to handle online shoppers and studies often found consumers complaining about how slow dealers were to respond to online requests. That appears to be changing fast. The study found that 66% of dealers now prefer that shoppers complete most or all of the purchase process online, including the finance portion.
How far a shopper can go online also depends on local laws. A number of states still require “wet” signatures on paper, rather than digital signatures on the required documents. But many dealers now will assist buyers who want to shop entirely online. They’ll bring a test vehicle to a home or office and, if required, they’ll do the same with the final paperwork, then deliver the new vehicle wherever a customer wants.