Consumers Are Shopping Around Twice as Long Before Buying a Car

Car Buyers Are Shopping Around Twice as Long

Buying a vehicle took consumers twice as long in the second half of 2021 as it took them in the first half, according to internal research shared by AutoWeb during its most recent quarterly earnings call.

Why? A company executive attributed the additional time spent shopping to the inventory challenges and high prices seen across the auto industry.

“This is further demonstrated by the sequential and year-over-year uptick in click traffic as we are seeing vehicle purchasers scouring the internet for favorable pricing,” AutoWeb President and CEO Jared Rowe said in a statement issued just before the earnings call March 24.

Auto Dealers’ Forecasts Are Changing Week to Week

The pricing trends seen in 2021 and pointed to by Rowe have continued into the new year, driven by a shortage of new vehicles together with the inflation that has been exacerbated by the geopolitical turmoil around the Russia-Ukraine war.

Prices paid on new vehicles gained 12%, and used vehicles were up 41%, according to the latest consumer pricing data by the U.S. Department of Labor.

Read more: New Vehicle Sales Declines Go Beyond Inventory, Chip Shortage

Rowe said during the earnings call that when speaking with members of AutoWeb’s dealer base, he found that the dealers’ expectations for the supply of new vehicles during the second half of 2022 are a mixed bag and change from week to week.

“Some are optimistic that second half inventory is coming back, some are pessimistic and it’s not coming back until next year,” Rowe said

Diversifying to Become More Resilient

AutoWeb is a longtime participant in the automotive industry as a digital marketing business and more recently has become a direct participant in what it calls the “matchmaking process” through its used vehicle acquisition business.

With its vehicle acquisition service, AutoWeb buys vehicles directly from consumers and then resells them primarily through wholesale channels. This gives consumers an alternative to trading in their vehicle to a dealer or selling it privately.

For AutoWeb, the vehicle acquisition service enables the company to leverage its existing audience to buy the cars it then sells to wholesalers. Rowe noted during the call that while the total addressable market (TAM) on the digital media side in automotive is about $17 billion, the TAM in the used vehicle acquisition business is $230 billion.

“Essentially, what we’re doing is we’re using the media side of the business to subsidize the vehicle acquisition side of our business — and they’re incredibly complementary because north of 60% of all consumers who come through the channel and want to buy a car, they have a vehicle to dispose of.”

AutoWeb expanded into the used vehicle acquisition business to become more resilient during the inevitable ups and downs of the automotive industry that, in turn, affect the demand for digital marketing.

Rowe said: “We can’t control inflation, we can’t control the Fed and the environment of increasing interest rates, we can’t control vehicle inventory, but we can control how we develop our audience, we can control how we then extract vehicles through the used vehicle acquisition channel and grow that side of the business.”