Online car sales are growing in popularity but will they ever usurp traditional dealers? We've compared the two ways of buying
4 March 2017

Keith Peile was sitting at home in Dorset one evening in January when he decided to buy a new Hyundai i10 from the comfort of his armchair.

“I’d seen Hyundai’s television advertisement for its new Click To Buy online service,” says the retired security officer. “I picked up my tablet computer and in ten minutes I’d chosen my new i10.

“I knew I would be getting the best deal so I was happy with the final price. Paying was easy, too.”

In the weeks since Click To Buy was launched in January, 30 people have bought a new Hyundai from the site, and 134,000 people have visited it to find out more. Peugeot has since launched a rival service it calls Order Online, and both join the schemes already offered by BMW and Smart.

Hyundai’s new system offers the greatest flexibility, though, in particular by allowing customers to pay cash for their new car, rather than being restricted to a choice of finance packages. The price of the new car is discounted, too, saving the customer the bother of negotiating. Like Peugeot’s service, Hyundai’s will also generate a quote for the customer’s part-exchange vehicle.

Bundle these three features together and with Hyundai’s scheme, interaction with a dealer is necessary only to deliver the new car to their home and arrange collection of the customer’s trade-in vehicle, or at the dealership where the customer must sign documents if they’re acquiring their new car on finance.

It’s a simple process. Within seconds of clicking on the website I was quoted £2350 for my part-ex – a 50,000-mile, 12-plate Peugeot 107 1.0 Allure 3dr – and had chosen to pay cash for my new car, a Hyundai i10 SE 1.0 66PS 5dr. Its on-road price had been discounted to £9495, from £10,075, leaving me with a cost-tochange of £7145.

However, just as I was about to choose to have my new i10 delivered to my house in two weeks’ time, I noticed home delivery cost an extra £250. The trade-in valuation looked a little low, too (for example, What Car?’s online valuation tool quoted me £2415), but I was getting a big discount on the list price and you can’t have both. Would I have done better using a dealer face to face?

At 3pm the same day I parked my Peugeot at Richmond Hyundai in Guildford and entered the showroom. A salesman soon introduced himself. I explained I was interested in buying an i10 and that I had a car to part-exchange. He asked me what I wanted to pay for the Hyundai and what I wanted for my trade-in, “in order to establish your budget”.

I told him revealing that would put me at a disadvantage in the negotiation, adding that I just wanted his best prices, simple as. 

We decamped to my Peugeot where the salesman gave it the once-over. He indicated the kerbed alloy wheels and thought the clutch was biting late. I returned to his desk while he debated its value with his boss.

He was back a few minutes later with a figure of £2150 and a price for the i10 of £9495, leaving a cost-tochange of £7345, or £200 more than the Click To Buy offer. However, he concluded our meeting by saying that for a decision now, he could reduce the gap, and I’m sure he’d have delivered it for free, saving me £250.

Had I been a genuine buyer, I could have compared his revised deal with Click To Buy’s and negotiated from that basis (not mentioning, the online service’s delivery charge, of course).

Later, Tony Whitehorn, CEO of Hyundai UK, explained to me that it might be possible to get a better price in the showroom than on Click To Buy, but that such an outcome wasn’t ideal: “A customer mustn’t feel that they get one price on the internet and another at the dealer.”

As for the variation in the partexchange valuation made by the online system and the dealer who subsequently inspects the car, Whitehorn explained that if those figures are too far adrift, the dealer delivering the new car or processing the deal in the showroom might ask the customer to pay an additional sum to close the gap.

“An auction house calculates the valuation and we underwrite it,” said Whitehorn. “That means we’re liable for the difference between the partexchange valuation and the price the car subsequently achieves at auction when it’s sold, so it has to be right.”

Whitehorn said Click To Buy would not replace traditional dealerships: “Although it suits people who like the convenience of buying from home and who don’t want to haggle, it relies on our dealers to make it work. [A dealer has to] receive the part-exchange and confirm its value, guide the customer through their finance and then, when they’ve bought their car, look after it.”

So dealers live to fight another day, but thanks to Click To Buy’s price transparency and free valuation, car buyers have another tool with which to achieve a better new car deal online or in the showroom.

Hyundai isn't the only online player...

BMW RETAIL ONLINE

You can choose, configure and finance your new BMW online, but this system relies on dealer involvement to process and conclude the transaction. Prices published online are not discounted and to get a trade-in valuation you must speak to your nominated dealer.

ORDER ONLINE BY PEUGEOT

Allows you to choose, configure and finance your new Peugeot. It offers trade-in valuations for your old car, but you can’t pay cash. The vehicle price includes the same customer saving as Peugeot’s other advertised deals, but you can negotiate a further discount with the supplying dealer.

SMART ONLINE STORE

Relies on a high degree of dealer involvement. You can choose and configure your new Smart but you’re restricted to three PCP deals – low monthly payment, standard and low deposit – and there’s no trade-in valuation service. Home delivery of your car is free, though.

Other independent multi-brand online sellers...

Online car buying has boomed in recent years, with traditional broker sites now being joined by new companies that offer buyers a wide range of cars available to purchase direct from dealers without the need to physically visit the showroom prior to collecting the car. The benefit is that this allows buyers to select their car and negotiate a discount without having to face a salesman, while still being able to choose which dealership they buy and collect the car from. Among the entrants to the market is our sister brand What Car?, which has launched a new car buyers' marketplace where dealers are encouraged to list their cars at or below What Car?'s Target Price, which is the most it says people should pay for a car based on research by its mystery shoppers. To find out more, visit the deals section on the What Car? website.

John Evans

Our Verdict

Hyundai i10

Our former city car favourite, the Hyundai i10, is replaced by a more grown-up model

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Comments
10

4 March 2017
if you want a Hyundai, and some of them are pretty good from my experience, particularly the little i10 and if you work for, are retired from, or have an immediate relative who works for most public sector organisations then go into your local Hyundai (and I think Kia, not certain) dealership and ask for an 'affinity' scheme quote. A member of my family has just got over 10% off a new top of the range i10 and well over book price on the part ex. The combined deal of discount and part ex price easily beat any broker or online deals.

4 March 2017
With Luxury products it would be nice to deal with the brand itself as they understand the customer and they care about what you want and what you are buying. Dealers are awful, they want to flog you anything they want you to buy because it suits them. I've never liked dealers from any brand. Most are txxxxrs. Guess for mainstream cars people will absolutely still want to try before they buy and see what they are buying and see it in the flesh, colours, materials and spec is important. I wouldn't want to buy blind but I'd be happy to buy on the net if I could go to a shop or an experience centre and not have the salesman trying to get his hand my pockets with his charmless smarminess.

4 March 2017
At work all of us buying new cars have ordered cars online via internet brokers (yes, it's a dealer but a hybrid of online vs showroom). The only person I know who actually went into a local dealer was my 72 year old mother in law!

 

 

 

4 March 2017
The worst part of buying my 7 new cars and motorbikes in the last few years has been the dealers! It's like working with 1970's culture. "Let me check with my manager" "I'm not sure where you car order has gone" "Sorry, that offer was closed yesterday after I placed your order" etc! They've added no value at all and just take a cut. Bring on multi brand, no sale, showrooms to test drive cars and then order online!

 

 

 

4 March 2017
...Online buying works for those who are not concerned or interested in how the car feels, drives, interior quality etc, or see cars merely as white goods used for getting from A-B,or those who implicitly know the brand they are buying and so only need spec the exact vehicle they want. My wife's recent experience with an online Broker has left a lot to be desired. We have saved a lot of money in terms of the overall purchase price and monthly payments, but it has taken many phone calls and emails and a cancelled order to get to this point. I'm sure the process will improve as competition increases, but for now, I'd still prefer to try before I buy.

"Why is http://www.nanoflowcell.com not getting more media attention? It could be the future... Now!"

5 March 2017
Simplicity has got it spot on. I will always want to see, touch and drive the particular model I'm interested in buying, including viewing all the different trims and colours. But I too hate the dealership experience: Lack of product knowledge and the patronising, sometimes arrogant attitudes of the showroom staff really winds me up.

5 March 2017
The comparison with white goods is interesting - shows how reliable/disposable cars have become. The internet is possibly OK if the car being traded in is below average but I prefer dealers, especially those who don't mess about "negotiating". For our Hyundais the local dealer is useless but another slightly further away is much better for servicing whilst a couple of others even further away were best for prices/sensible dealing so it pays to shop around if possible.

5 March 2017
We bought our first car online in 2001 and have tried, whenever possible with new cars to always buy or lease them online, although the last two we bought new last year, we bought by visiting dealers, both with very different experiences. The VW dealer for my Golf was painless, no bullshit and very simple. The Jaguar dealer for my wife's car was a very different experience, complete tossers, patronising in the extreme, particularly to wife, neither of us are English, as soon as the sales guy realised this his attitude completely changed. My brother-in-law works for VW, I know there are plans/talk of moving completely away vehicle purchase and moving towards leasing/contract hire for vehicle supply across Europe. Cars will be ordered online and simply be supplied from VAG Service and Supply Outlets. Two driving factors behind the plans are the protection of profits and, particularly for VW, the move towards electrification for most of its models. The upgrade to MQB has been delayed as the modular system is being split into two distinct platforms, one for internal combustion/hybrid and one for electric.

5 March 2017
And poor old Keith buying his car on line probably ended up with zero discount or a couple of quid off that the manufacturer gave him while laughing up its sleeve. Its people like Keith who I feel for, too insecure to go into a garage and negotiate a better deal. Its like the car buyer companies on tv claiming you might get "a few quid more" if you advertise and sell your car yourself.

5 March 2017
[quote=centenary]And poor old Keith buying his car on line probably ended up with zero discount or a couple of quid off that the manufacturer gave him while laughing up its sleeve. Its people like Keith who I feel for, too insecure to go into a garage and negotiate a better deal. Its like the car buyer companies on tv claiming you might get "a few quid more" if you advertise and sell your car yourself.[/quote] Unfortunately for us all (including Keith) the traditional model of walking into a dealership and getting that 'better deal' is not sustainable for manufacturers. However unsavoury it seems for those who hate the idea of someone making money out of them, the current business model no longer works, tiny margins for sellers, tiny margins for logistics, no margins for some manufacturers and our tax money being spent by our Governments propping up facilities for manufactures to assist in production and placing employment locally. However good it makes us feel getting that big discount, we've paid for it else where.

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