Online Car Buying, Continued

In the previous instalment, we covered about half the required tasks in our buying process. Not by coincidence, we began with a precedence diagram and we stopped at the topic of navigation. I began my inquiry with precedence because I wanted to see if there was perhaps a better sequence for the tasks.

Most of my readers are familiar with the traditional dealer-based process, which is basically sequential. Our web-based, customer-driven process does not have this constraint. The process is constrained only where tasks have prerequisites.

Online PERTWe could enforce a sequence, but I am not a fan of artificial constraints. A passive approach is better, wherein the customer will choose her own path through the process. This means the site must manage the state of the work in progress. In this article, I will refer to the work in progress as a “deal.”

Before we proceed, let’s digress for a moment and assume that my passive approach is incorrect. You will have coded, all for nothing, a robust deal class and a set of tools for managing its state. The customer, it turns out, was happy to be led through the process. She has no need for a feature like, “keep my lease terms the same but swap in an upgraded vehicle.”

On the other hand, if you take a rigid approach and you later need to add such a feature, then you will have real problems. You are better off building a proper framework up front. Adding constraints to a flexible process is a lot easier than going the other way.

I envisage a process where the customer can use our tools for shopping, and then register a free account when she wishes to save the deal. Graphic elements on the site will show how complete the deal is, and the customer can decide when she’s ready to send it to a dealer. She can save multiple deals, which may share attributes.

Trade In and Trade Up

I have talked to people who consider trade valuation to be just as problematic as pricing the sale vehicle. This is not my area, but I can see the need for an accurate valuation. Unfortunately, there is no good way to appraise a car online. A visit to the dealer may be required.

Like the earlier discussion about inventory, much depends on the business model. If the site is operating on behalf of an individual dealer, then there’s a need for precision on every vehicle. If the site will handle a high volume of trade vehicles, but its primary purpose is to sell new vehicles, then an accurate average will suffice.

What I would suggest is to present the Kelley Blue Book value, and be prepared to honor it unless the customer is materially wrong in his condition assessment. The difference between “good” and “very good” for a five-year old Ford Focus is $250. Also, if the dealer is using a provisioning system like vAuto, then there’s an opportunity to develop an interface and let it make the decision.

Again, this is not my area. I am standing on the general principle that, if there is a dealer system, then we can interface with it. The business model dictates whether there is one relevant system, or many. We’ll see this again when we come to the credit application.

Choose Your Payment

I named this section “choose your payment” because that’s how our customer is likely to use the deal structure tool. Most shopping sites support only a forward calculation, proceeding from the sale price to the monthly payment. Lending sites provide a simplified “rollback” calculation, which allows the customer to start with the desired payment and work backward to the sale price.

Unfortunately, these sites omit local taxes, fees, and incentives. These items can make a big difference to the deal structure, and including them in a rollback is computationally complex. I have some experience with these calculations, from my time at MenuVantage. If you have to choose, skip the rollbacks and, instead, allow the customer to clone and save multiple deals.


An individual dealer will keep track of the relevant incentive programs. If more than one is available, he will choose the best combination. To do this online, you must link to a service like Market Scan. Taxes and fees mean another data feed, or two, not to mention rates and residuals for one or more lenders. You can see how this is easier if we restrict our scope to one OEM and its captive.

All of these features are available in the dealer’s Desking system. Some sites, like AutoNation, have the advantage of standard systems across the dealer network. Other sites have Desking capabilities built in. I am trying to keep this article general, and not make assumptions about the dealers. Here are some suggestions:

  • Enforce a standard Desking system at the dealer level, and interface with it.
  • Engage a Desking system vendor to work with the site, including local tax and OEM data.
  • Support multiple Desking systems and try to develop a generic interface.
  • Build your own Desking system, including data feeds (not recommended).

Fees, like an Etch fee, might vary among dealers. Consolidator sites have an advantage in harmonizing fees.

Standard functions for any Desking system include calculating a loan, calculating a lease, comparing two deals, converting a loan to a lease, and experimenting with different rates and terms. Much Desking functionality, like the venerable “four square,” is sales oriented and not relevant to our online consumer. I would really like to see an objective way to compare two deals, like calculating an IRR, or presenting the TILA values.

Obtain Financing

Here again, I am going to delegate the work to a dealer-based credit system, like Route One. These systems are the most advanced among dealer systems, in terms of being plug-in ready for consumer sites. See my earlier article, Claiming Space on Consumer Sites, for more explanation.

A site controlled by an OEM will have an easier time with rates, incentives, and credit application

Since we are doing indirect lending, we can’t postpone the “choose a dealer” task any longer. Our customer must apply for credit via a specific dealer. The fastest way to do this is with an interface that routes through the dealer’s credit system, selects two lenders using rules from the dealer’s profile, and sends them the application.

Obviously, the F&I Manager would prefer to route the credit application, and we can offer “assisted routing” as an option, but we don’t want to impede the customer. The F&I Manager is not going to complain about approved apps appearing on his dashboard.

At this point, our customer is ready to print and sign the contracts at home. Signing the contracts electronically is not a requirement, although we will utilize some e-contracting infrastructure. I had a hand in developing this infrastructure for Provider Exchange Network, and I am certain it will stand up in a consumer context.

Remember that our design objective is to empower the customer and save time in the dealership. Physically signing the papers is not time consuming. There are other reasons to do e-contracting, which we will leave to the dealer systems.


I hope this article has given you some useful ideas about online car buying, as distinct from shopping. I set out to show that the entire process, as we know it in the dealership, can be transferred to the consumer space.

The basic technique I propose is to take the functions of systems already in the dealership, interface them, wrap them, and organize them into a consumer web site. I also presented a rough outline of how navigation and deal management would look in this context.

Car buying sites, as they develop, will have different business models. They can be categorized according to their relationships with the participating dealers. Because the site interacts with the dealer systems, the nature of this relationship has a profound impact on site design.

For example, a site controlled by an OEM will have an easier time with rates, incentives, and credit application. A site controlled by a dealer group will have an easier time standardizing systems, fees, and trade valuation.

Our design goal was to improve efficiency by making the customer autonomous, but this is not a dealer averse process. It is a flexible process that allows the customer to engage with the dealer as much or as little as desired. Modern dealers should have no difficulty with flexible processes and empowered customers.

Author: Mark Virag

Management consultant specializing in software solutions for the auto finance industry.

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