Search, Click, Buy, Deliver: The Road to Amazon-Style Car Buying

In a world where you can buy virtually anything online and have it delivered without ever interacting with a human, purchasing a new car has been one of the last frontiers.

It is not that dealers are Luddites. They have a myriad of online tools available on their sites, as do the automakers themselves and a growing number of third-party car-buying sites.

But the model most buyers follow is that they research extensively — an average of 16.7 hours spent online, according to AutoTrader — and use websites to find and configure a new car, read reviews and buyer guides, price compare, apply for financing, even supply details for a trade-in. But closing the deal usually means a trip to the dealership to finalize the paperwork, get the keys and drive away.

That is what Aaron Krane discovered when he tried to buy a car for his commute from San Francisco to Silicon Valley. The 33-year-old entrepreneur wanted to click his way to a final purchase and have it delivered, Amazon-style. But every online session took too long and ended with the address to the nearest dealership.

When he learned he had to go to a Mercedes dealership to buy a CLA, it was a deal-breaker. He ended up buying a BMW M4. The process was still inefficient but he was able to bypass the dealership by having the contracts mailed to him.

The experience convinced him of one thing: “No one could capture me as a consumer,” he said. “It is absurd to need human interaction. The prospect of having to go offline creates a sense of dread.”

As a Millennial he knew he was not alone in his buying habits. “Customers want an instant on-demand experience without back and forth,” Krane said.

The seeming inability to conduct and close the deal entirely online took him in a new business direction. His new research project: car-buying without human interaction.

About a year ago Krane began working on the software behind Drive Motors, a startup designed to allow you to buy a car in your pajamas in the middle of the night and arrange free delivery.

Krane has raised about $1.6 million for Drive Motors, which he says will be profitable within the next two months. His small team of five is backed by big names in the startup world, including Y Combinator and Khosla Ventures where he was entrepreneur-in-residence pursuing data-related business ventures until his car-buying experience altered his course.

The fledgling company has about 60 dealerships — including the nine Krane added on Wednesday — so far with an inventory of about 10,000 cars for sale. Most of the early adopters are in California and Florida but the plan is to be nation-wide. He envisions he could have 400 or 500 by year’s end but admits that is just a guess. He does not even have a sales person yet, the team is all software engineers. The potential is huge: there are almost 18,000 dealerships in the U.S.

Krane spent about five months developing the prototype, which he tested with a friend’s family dealership. One of the first lessons he learned: make dealers your friend and ally — not your competition. He got a lot of blowback initially from dealers, which convinced him of the wisdom to work with them.

For $695 a month, Drive Motors provides software to dealers and also promotes their vehicles on the company website. The program plugs into a dealership’s existing websites, giving them a “buy” button for a faster and more streamlined online checkout process. It packages the ability to choose a vehicle, configure it, buy upgrades and accessories, arrange financing, insurance and a trade-in, and then place the order and pay. Consumers are warned if they supply false information, the deal is off.

Drive Motors gets no money from the vehicle sale.

It is akin to the Tesla direct purchase e-commerce model but applies to all makes and models. And, importantly, Krane avoids any legal franchise law backlash because the sales still flow through the dealer.

“A lot of companies have been trying to execute this for a long time,” Krane said. “There are some who want to eliminate the dealership. We love dealerships. If dealerships already exist, why not work with them?” was Krane’s conclusion. Under his model, the dealer has the inventory, sets the prices, and approves all aspects of the deal before delivery.

Drive Motors’ software allows the consumer to sit on their couch and fill in the paperwork that a salesman would have done laboriously in the office while the customer sat fidgeting. No money changes hands until the car is delivered and the final contract is signed.

Krane knows he is not reinventing the wheel. Dealers already offer many digital tools: chat windows, financial calculators, trade-in value generators. The software specialists at Drive Motors put the buying tools together in a single, simplified process that the dealer website can offer customers.

Carroll Lachnit, consumer advice editors at Edmunds.com, said it is a nice clean site and that it’s smart to include the ability to purchase aftermarket items. “I can see the appeal.” One criticism: it currently has fewer pictures than most buyers normally seek when researching a vehicle to buy.

Tapping dealership expertise also provides confidence for the customer who will also appreciate the speed and convenience, Krane said. Dealers get completed sales dropped in their lap.

Third-party sites should not be alienated because their focus is more on locating the right vehicle and sending the customer to a dealer who can then offer Drive Motors’ online checkout service.

“Everyone is trying to make the whole process of buying a car easier for customers,” Lachnit said.

AutoTrader surveyed about 4,000 consumers last year for its “Car Buyer of the Future” study and found they overwhelmingly dislike the current car-buying process — especially the 4-6 hours it takes to complete the transaction and the hour just for the credit check, said AutoTrader President Jared Rowe in releasing the results.

AutoTrader found 84% still want to buy their car in person after spending so much time researching it and knowing they will own it for many years.

That could change with a new generation of buyers. “There is a lot of frustration, especially younger customers raised in the era of Amazon, said Lachnit of Edmunds. “They want to know where the buy button is.”

Krane is a car guy but said he and his colleagues have bought cars unseen and untested. The easy-buy solution also is convenient for the person who does a test drive and then later decides to proceed with the purchase on their time, in their home, with no sales pressure, making the software “a potent sales weapon.”

Krane doesn’t want to reinvent the wheel. “We like the wheels dealers created. We want to turbocharge it by creating an automatic closer.”

Nor does he expect to exclusively hold the solution. He thinks Drive Motors is the only one offering an assembled solution right now but knows everyone in the auto industry is working on solutions to the unwieldy buying process. His take: look at every solution for now.

He also thinks Drive Motors has an edge because the independent software works with all manufacturers.

Large dealership groups are trying to build their own version but Krane is convinced his team has a product that is faster.

Automakers are also tackling it. General Motors introduced an online shopping tool called Shop-Click-Drive, which allows consumers to find and price a car, with accessories, and line up financing but still requires a dealer visit to sign the paperwork and take delivery.

“There are lots of solutions in the making,” said Lachnit. “Lots of smart people are getting at this, knowing younger buyers won’t tolerate this. Their shopping understanding is buy at 10, have it at 11.”

 

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