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How Do Online Car Dealerships Work? – Here’s What You Need To Know

How Do Online Car Dealerships Work

Car Dealership by Definition


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A car dealership, or local car distributor is a company that markets new or used vehicles on retail on the basis of a dealership contract with an auto manufacturer or its sales subsidiary. It can also hold a range of Licensed Pre-Owned cars, employing car salespeople to sell their automotive vehicles. Dealerships can also provide repair facilities and hire technicians to store and deliver spare parts for automobiles and to process insurance claims.


History of Car Dealership and How it Got Online 


In the earlier days cars were sold by automakers themselves directly to customers or through different means like mail orders, traveling representatives and even department stores. Direct sales in the US are now limited by most of the states mandated by franchise laws that require new vehicles be solely sold by bonded and licensed, independent dealerships.


Specific companies franchise out for car dealerships to sell and service their car. Dealerships are often located on the edge of town centers or out of town in properties with enough space to have buildings that could house a showroom and storage for used and new vehicles, and space where mechanical and body repair services can be made. An example of a car dealership with  traditional single proprietorship is Collier Motors in North Carolina.  While numerous modern dealerships are now part of corporate-owned chains like AutoNation which has over 300 franchises. Bulk of their profits come from servicing used cars and a bit from new cars.


Most automakers are now shifting their focus from franchised retailers to branding and technology. Dealership facilities are now required to have a standard look and have product experts to consult with customers. A good example is the use of hi-tech showrooms that allow customers to configure and experience cars on 1:1 scale digital screens.


Tesla Motors has since rejected the dealership sales model as some dealerships they perceive do not sufficiently and properly explain the advantages of their cars, and they could not rely on third party dealerships to handle their sales. And since direct sales by manufacturers are prohibited in almost every state by franchise laws Tesla has opened city centre galleries, inspired by Apple Stores, where prospective clients can view cars that can only be ordered online. Tesla's online model was the first of its kind, and has given them a unique advantage as a new car company.


Tesla has opened a whole new world in car dealerships. Prospective car buyers no longer have to go to a physical location to speak to a dealer then have to drive their car home after making the purchase. Though traditionally most cars are still bought this way, car dealerships have now begun to catch up with the digital age, with Tesla as an example of a pioneering success in online car selling.


How Online Car Dealerships Work


Online Car Dealers retails vehicles to businesses and individuals and could provide other related services such as auto loan financing and vehicle trade-in. Brick-and-mortar car dealers that offer online purchase of their automobiles and Online-only dealers are also included in this growing industry. Automobiles include trucks, passenger cars and sports utility vehicles (SUVs). Classified Websites that feature photos, reviews, guides and ads of brand new and second-hand or used cars are not included in this industry.


Choosing to purchase a car online has its advantages. Car buyers who want a new car from a dealership near them can always conveniently order their preferred car online through that dealership. But for those who want a broader search for greater car selections they can choose a variety of websites and even apps that in turn will search for multiple online dealerships’ inventories. There are already online car dealerships that have their whole car buying process available online. 


Doing the car search online is not only convenient as it can be done even at the comforts of home, but it can also present any prospective car buyers greater vehicle selections. Opposite to a traditional physical dealership wherein your options are limited to the cars available at their location, car shopping online offers you limitless browsing options from many different sources so you can get exactly what you want. This is especially true if you opt to use a site that checks out inventory from a wide variety of dealerships. 


And if you’re worried about the price, don’t be because online car dealerships actually have the advantage of helping you keep more money in your pocket. That is because online car dealers do not have as big overhead costs than the traditional physical dealerships so they are able to sell vehicles with a lower markup. So the way it works they can actually put a price on their cars more competitively, which is always a good thing for any consumer. And the same advantage goes to customers even if they’re buying from an actual brick-and-mortar dealership and merely completing the purchase online. Without the dealership’s face to face access to their customers for pressure selling with showroom environments, companies are left without a choice but to provide better deals just to convince clients to complete the sale. 


One of the least favorite experiences of car buyers is probably having to deal with high-pressure pushy salesmen. So if you’re the type who can do without these high pressure tactics then going to an online car dealership is the way to go for you. Online dealerships allow their clients to make their decision at their own pace at the comforts of their own home.


And with the way everything works in the digital world, online car dealerships actually offer a streamlined buying process, which can be done very quickly. With the way traditional car dealerships work you have to go through a very tedious process of test driving a vehicle, discussing and negotiating prices before finalizing the purchase. Online car dealerships can help you complete a purchase in a matter of minutes if you prefer to. All information you would ever need is made available already online so you can do your own research without the risk of being misinformed by a car salesman.


COVID-19 and its effect on Car Dealerships


The emerging online car dealership industry is expected to grow exponentially along with other e-commerce most especially during this time of Pandemic when people are encouraged to do their purchases online. 


Along with all other markets the selling and buying of cars have to dramatically adjust for safety measures along with all its restrictions during this time of pandemic. All commercial activities now lie heavily in internet usage. Vehicle demos now include valet-style pickup and delivery service for every transaction from test drives to oil changes.


Rhett Ricart, CEO of Ricart Automotive Group in Columbus, Ohio, also chairman of the National Auto Dealers Association said, “This is going to fundamentally change how people view buying a car. By the end of this year, you’re going to see 80%-90% of U.S. new car dealers with full e-commerce capability in their shops to handle everything online but the test drive and – maybe – the final signature.” 


Doug North, owner of North Bros. Ford in Westland, also chairman of the North American International Auto Show has also observed the same. He perceives that the pandemic is going to create some permanent changes in the way cars will be sold.


Getting all the car sales processes streamlined online and going totally paper-free will require changes to laws that require physical signatures but North believes the government is open to the process, particularly at such a time when a decline in tax collections from auto sales adds to the burden on state finances. Dealers are currently stepping up their online efforts to set appointments for test drives for as early as the rules allow.


Customers are able to reserve a specific car from the inventory to buy or to test drive. More staff are now manning dealership websites and phone lines during the shutdown. Online walkarounds are now being planned to be done to touch every aspect of a new vehicle. North said, “It’s really important for the customer’s long-term satisfaction that we describe at least the basics of a vehicle’s technology and safety features.” 


North described a plausible process in which a car buyer comes to an empty dealership to sign for a car picked, priced and financed online and then everything the buyer has touched will be freshly disinfected. If the buyer uses one of the dealership’s pens they’ll take it with them as they leave. Autotrader, a buying research website, also launched Dealer Home Services, which is a set of online tools for “no contact interactions,” that includes scheduling test drives, pickup and delivery.


Dealer Online Services Offered by Different Automakers as compiled by DigitalTrends:




Online selling has been embraced by Tesla for years with success. They are able to have customers configure one of the company’s electric cars, buy it and schedule home or office delivery all through their website. 




Audi’s dealers in America have started to offer online transactions and even home delivery well before the COVID 19 lockdowns and social-distancing measures. Many dealers give their customers the choice of scheduling a Zoom call with one of their sales personnel to talk about the car of their choice. Home delivery is also usually available.



Fiat-Chrysler Automobiles (FCA) has a program named Drive Forward for its Ram, Jeep, Fiat, and Alfa Romeo divisions. Every step of the car-buying process can be done online and it gives customers the option of selecting home delivery if the dealer offers it. E-signature and the ability to offer financing online helped FCA launch Drive Forward quickly and seamlessly.


Ford’s Ready, Shop, Go online buying program launched in 2018 enables their customers to configure their car, apply for financing, estimate the value of their trade-in, add any applicable incentives and complete the transaction online.  A bonus is that most of its dealers can deliver the car to your very home. Their Lincoln Division runs a program called Effortless Sales, where they offer a showcase service highlighting a car’s interior and exterior features through a video-conferencing tool showing everything in great detail. 


General Motors


General Motors established its Shop Click Drive program in 2013 to attract buyers “turned off by the dealership experience.” Cars made by Chevrolet, Buick, GMC, and Cadillac are available for the said program and buyers have the option to have their car delivered at their home or office.




Honda’s Shop Simple allows you to search for a car, calculate its total cost (including taxes and the mandatory destination charge), get a trade-in appraised, and request home delivery. The program’s availability is limited for now. 


Dealerships in Nashville, Tennessee, and Portland, Oregon, are participating in the program, and the program is expected to grow in the coming months. Honda-owned Acura also has a program called Precision Purchase, which is currently limited to central Texas, but will also be expanding to other regions in the coming months, as well. They’re also working on making available services for pick-up and drop-off.




Although it doesn’t have an official program yet Mercedes-Benz already lets customers configure a car, complete financing, and request for home delivery online.  Many of its dealers are willing to work with clients online to help complete the sale. Some will even bring a car right to the customer’s home or office for a test drive. 




Many Nissan dealers are now independently making the buying process digital and are now offering home delivery. 




Porsche has expanded its existing online sales by fast-tracking dealers through the enrollment process. The service is for new and certified pre-owned cars covering every aspect of the process such as buying, financing, or leasing a vehicle. They also do home delivery and even help buyers shop for insurance online.




Some Subaru dealers provide remote shopping options on new or used vehicles, with the option to complete all of the paperwork and get trade-in appraised online. Curbside pickup or delivery can also be arranged although these services vary from dealer to dealer.




Toyota and their Lexus division are working with their dealers to make online transactions easier, with home delivery at no extra charge. Owners also have the option to get their car serviced for oil changes and tire rotations at their own garage based on availability of certain Toyota and Lexus dealers that could go for house visits.

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