Daily Archives: November 24, 2008

Death of the Used Car Dealership?

This weekend, I finally took tangible steps to phase out my aging Nissan Sentra, and look for a newer (about 5-6 yrs old) car. The Sentra now has 200k miles, and is a 1995 model. Phew. Still gives me absolutely no major problem, but it is time now.

One of the better places to look for used vehicles on the web is Craigslist (or at least has been known as one of the better places). It does have a couple of issues – like not able to search by mileage, and since the search feature works only on Keywords, it is not easy to search for a model (say you search for a Civic, then even a car advertised as “better than a civic” will show up). This is simply because CL does not have a specialized model for cars, it is simply a generic ad posting website. On the plus side though, you can bookmark full URLs, such as: http://washingtondc.craigslist.org/search/cto/mld?maxAsk=10000&minAsk=5000&query=sentra which searches for all Sentras between 5000$ and 10,000$ located in Maryland.

So, how has the used car dealership changed due to the internet boom, and what are its future prospects? The car dealership was established to fill two main needs. Firstly, it serves as a collection point for many cars – sellers can trade in their vehicles, and buyers can buy those cars. Thus, it was much easier before the Internet era to match up buyers and sellers by inserting the dealership as the middle layer. Secondly, the dealer could review the cars, and provide some sort of soft guarantee that the car being sold is not a lemon. The dealer’s reputation hinges on the performance of the vehicles it sells, so it is not usually in dealer’s interest to sell bad cars (though, it is entirely in dealer’s interest to charge another 500$ as some “fees”, as people rarely remember that a few weeks after the transaction).

With the advent of the web, the first need has gone away to a large extent, and if it hasn’t gone away entirely, with adequate web sites and web applications, that really should go away. People should be able to go to a central website (such as CL), and sell and buy cars. The second need still remains as customers are extremely cautious before buying from other customers. Though in this regard, the customers have started bringing their own mechanic and using vehicle history reports (which mean so little or not at all by the way).

So, all factors considering, what is really happening – are used car dealerships going bust, or they actually growing? I will look at some statistics to answer that. But until I get down to doing that, I am going to take a “wild guess” that the used car dealerships are still growing and will grow, until the web applications can really make it much much more user friendly for people to find cars, and vehicle history reports can start meaning something more.