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Sid DeBoer plans to do what the entire auto industry has talked about but never quite achieved -- sell cars online from start to finish.
DeBoer's company, Lithia Motors Inc., plans to sell 25 percent of its new vehicles over the Internet within the next decade. If so, it could sweep in a new era of automotive retailing.
A recent National Automobile Dealers Association survey shows the momentum already exists. Dealers completed an average of 7.5 online deals per store in June.
Lithia's competitors dismiss DeBoer's plan as a fantasy. But the Lithia CEO has always thought big.
About 20 percent of Lithia's car sales start online, DeBoer says. But customers cannot use the Web to finance or complete transactions.
The next generation of new-car buyers will demand the convenience of completing purchases online, DeBoer says. That includes not only shopping but also trade-ins and financing, he told Automotive News.
"If it is more efficient and quicker, and it saves people time, then it is inevitable that it will happen," he says.
DeBoer's son, Mark, recently shopped online for a Lexus GX 470. He bought the SUV from a dealership in Los Angeles, 676 miles from Lithia's Medford, Ore., headquarters.
Mark DeBoer says he spent an extra $500 for shipping, but the SUV cost $2,000 less than it would have locally. And he got the color and features he wanted.
"It's no-hassle," said Mark DeBoer, Lithia's (Lithia.com) vice president of real estate construction. "There is no face-to-face confrontation or negotiation" when buying a car online.
Mark DeBoer found the California dealership through Lexus' corporate Web site. He called the store to determine if it had the SUV he wanted at a discounted price. He sent a check and the signed paperwork to the dealership by Federal Express.
Paperless transaction
About two-thirds of the 521 dealers who responded to NADA's (nada.com) survey in June said they completed at least one car sale online within the past year. That excludes payment and vehicle delivery.
Allowing the entire transaction to be completed online -- from shopping to electronic contracting -- will benefit the company as well as consumers, says Sid DeBoer.
Lithia Motors ranks No. 8 on the Automotive News list of the top 100 dealership groups in the United States with retail sales of 56,529 new vehicles in 2004. The publicly held group, which sells cars in 12 western states, had revenue of $2.75 billion in 2004.
The Internet can help Lithia further streamline operations and, as a result, save money, Sid DeBoer says. For example, he says, Internet personnel at Lithia's headquarters could electronically view and appraise used vehicles traded in at the company's 93 dealerships rather than taking the time to do them physically.
Lithia already has trimmed its roster of dealership employees by turning over some functions to its central staff. For example, a dozen wholesalers on Lithia's corporate staff auction off higher-mileage vehicles. That task used to be done by the company's used-car managers.
The company lost $1 million wholesaling used vehicles in 2003, Sid DeBoer says. But it made $2 million from its revamped wholesale operation in 2004, he adds.
To help him reach his online goal, Sid DeBoer hired Alex Hart as director of Internet marketing, a new position.
Over the past 15 years, Hart has worked for Internet companies such as Cars.com.
Skeptics abound
Sid DeBoer: Putting car sales online will help Lithia's cost-cutting effortsSid DeBoer, 62, says he expects Lithia's online initiatives to pay off.
But the company's competitors cite big obstacles to completing new-car sales online.
Some say trade-ins cannot be appraised accurately without a physical inspection.
Many deals are complicated because a buyer owes more on the trade-in vehicle than it is worth. And buyers with blemished credit histories may have trouble financing online because lenders require extensive documentation.
High-risk, subprime customers represent at least one-third of vehicle sales, says Joseph Herman, senior vice president of operations for Group 1 Automotive (group1auto.com) in Houston.
Herman doubts many of these riskier customers could get financed online.
"That process can't be done online," he says. "How do you get me a phone bill online? How do you get me pay stubs online? A lot of subprime lenders require that."
Herman and others note that electronic contracting, which uses digital signatures, is in its infancy. They say many customers are skittish about entering personal financial information online.
Ken Gilman, CEO of Asbury Automotive Inc. (asburyauto.com) in New York, says a car sale is an emotional purchase.
"The Internet can enhance the experience," Gilman says.
"But the customer still wants to look at the car and walk around the car and sit in the car and drive the car."
UnitedAuto Group Inc., of Bloomfield Hills, Mich. (unitedauto.com), is promoting online car sales through a pilot program at its Ferrari dealership in Las Vegas.
Tony Pordon, the company's vice president of investor relations, says the greatest potential for Internet transactions is in the market for high-end, exotic used vehicles.
"I definitely think there are ways to grow that business," he says.
The Internet makes a strong showing as a tool for gathering vehicle information, says Dennis Galbraith, senior director of automotive Internet marketing for J.D. Power and Associates (jdpower.com) in Westlake Village, Calif.
Two-thirds of new-vehicle buyers shop online, Galbraith says. For buyers under 40, it's 80 percent.
But just 17 percent of buyers use the Internet to research financing, such as checking interest rates, he says. And of those buyers, only 32 percent apply for financing online. In all, 2.4 percent of automotive Internet users finance their vehicles purchases online, he says.
The vision
Trade-ins and negative equity are not insurmountable obstacles to online sales, he says. And documents can be faxed, he adds.
Sid DeBoer says Lithia will test its online security systems rigorously to protect customer data.
He concedes online financial transactions will require extensive education for his company as well as customers.
But DeBoer says he is just as committed to making online vehicle sales work as he was to the plan he initiated in 1987 to take his dealership group public. Lithia went public in 1996. Last year Lithia sold 56,529 new cars.
"I have a vision," DeBoer says. "I just need to get everyone to buy into it and execute it." |
