Will all cars one day be sold this way?

We’ve written a lot recently about how the internet is changing the way cars are presented, marketed and ultimately sold. It’s possible that one day, perhaps in the not too distant future that all cars may be sold online. Does this sound a fanciful concept? Does it require a massive leap of faith to envisage a time where we can buy a car with a couple of clicks? Well not really because it has already started happening. Autoquake (www.autoquake.com) is currently the only UK based company selling used cars direct to the public via the internet. We’re not talking about marketing cars to the public on behalf of dealers, where the real business ends up being done in the showroom. No, you do your research, browse the stock on the site, look at the detailed images, make your choice and buy it. You can then pay a fee to have the car delivered or arrange to collect the car from one of the holding centre’s. If you want a test drive before you buy you reserve the car and make an appointment and if you don’t like the car then the deposit is refunded “no questions asked”.

Autoquake source their cars from UK leasing companies, 12 of which are in the UK top 20 and receive 1,000 cars per month which they anticipate doubling by the end of 2009. You won’t find many high end models but the de-fleets they do sell will always have a full service history and no more than 2 previous owners. Their core stock will all have less than 50,000 miles on the clock and will be less than three years old. Like most of the used car trade there have been stock issues of late, with their average of around 600 cars available on the site having been somewhat depleted in the first months of 2009 but they hope to be back up to this figure again by the end of April.

Autoquake is predicting rapid growth in this sector and we have seen over the last year that eBay and Autotrader are upping their game. What a game it is with approximately £1.2billion worth of cars transacted on eBay each year. Autoquake sold 700 cars in 2007, 4,700 last year and predict 15,000 for 2009 which is pretty spectacular growth even without a recession. A recent report by CapGemini stated that 20% of consumers were “likely” or “very likely” to purchase a car online, which was up from a figure of just 2% in 2001. However Autoquake take the whole process much further than eBay, Autotrader and the like and seem to have discovered a formula that enables potential customers to buy with confidence, which really is vital to their business model. If a car is not as described in the minutest of detail the whole concept falls down. They are backed by some £10 million of venture capital investment so they certainly mean business when trying to exploit this gap in the market.

It seems that the cars listed are generally cheaper than main dealers and supermarkets (10% cheaper than supermarkets and 17% cheaper on average from franchised dealers according to Autoquake) and their focus on absolute transparency and quality of information is obvious when you visit their site, which also offers a rewarding user experience (you can see where a lot of the investment capital went!). It will be interesting to see how long it is before they are seen as a real competitor to traditional car sales outlets. As companies observe the success of Autoquake will they be able to keep this market for themselves or even remain the market leaders once other, major players decide to throw their hat in the ring. With the rapid growth in advertising of cars generally on the web, which in turn has virtually wiped out the competition from newspaper and magazine advertising, could this really be the future for selling cars?

However a stumbling block to the Autoquake model could be their inability or unwillingness to deal with trade-ins. If we look at the amount of cars traded in to car dealers every month (which is reckoned to be somewhere in the region of 1 part exchange to every 2 cars sold) they are potentially losing out on a huge amount of sales and this could ultimately limit the growth of the concept. As you can imagine most buyers don’t have the time, confidence, knowledge or inclination to sell their cars privately so are prepared to sacrifice a few hundred pounds by trading their old car to a dealer and in their minds this far outweighs the struggle to sell privately. Autoquake argue that they can only offer the low prices they do by eliminating the costs a normal car dealer would incur such as employing sales staff and dealing with part-exchanges and the best they can offer is some tips on their website on “how to sell a car”. It may be difficult to quantify how many potential customers fall at this first hurdle but we’re sure the figure is significant. That said with the advent of other car sites such as www.webuyanycar.com amongst others, there will surely be companies who will take up the slack. As with anything the easier and cheaper you make it the more customers you will attract.

The Autoquake concept seems elegantly simple and robust and as one day all cars may be sold this way we thought we’d better put the system to the test. So what happened when MTI bought it’s very own used car from Autoquake?

We first of all decided on the car we wanted and after a small amount of deliberation plumped for a Seat Leon. We browsed through the available Leon’s on the Autoquake site and found just 4 so the choice became a little easier. We quite liked the look of the 1.9TDi Sport which at £9,198 for 07 57 example with 26,000 miles seemed reasonable (price new £13,880 trade approx £8,500).

We browsed the information and photographs of our chosen car. The information is very detailed and the photos are clear and sharp with some 50+ images in total which give a good indication of the cars general condition. Autoquake themselves consider the USP’s of their operation to be “trust and transparency”, “hassle free” and “low prices” and judging by the information available on each car, the fact you can buy from the comfort of your own home and the prices quoted they may have a point.

OK pleased so far with what we’d seen we decided that this particular Leon was the car for us and clicked on the “reserve” button. We were then taken to a secure part of the site in order for us to leave our refundable deposit of £100.00 by credit card. Now although the price advertised for our car was £9,198 there is a “transaction fee” of £59 added for “administrative costs” which took the actual price of our car up to £9,257. In the event of us deciding we didn’t want the car within the 7 day refund period and after having paid in full, we wouldn’t actually get the £59 back. This is not terribly clear on the site and you have to click through to the “money back guarantee” page for an explanation (of sorts) “We’ll have to hang on to the cost of delivery and transaction fee” is all it says. It doesn’t mention this on the FAQ page (which is otherwise quite good and well thought out) and in fact states the following; “All our cars have a 7-day money back guarantee – No questions asked. If you are not satisfied with your car, you can return it up to 7 days after pick up or delivery and claim a full refund.” Except it’s not quite a full refund is it? That is the first negative so far but we feel this could and should be made a clearer. I suppose if you’ve been driving the car for seven days £59 seems quite reasonable but some people will feel caught out and if it’s not a full refund it should say this.

The car is now reserved for three days only so we’d better get our skates on (although we could have opted to extend the reservation period by upping the deposit to 10%). With the reservation process now complete we received an email giving us all the details of our car and the contact details to take the reservation further, which we, of course did and arranged a date for the collection.

Fast forward to d-day and the insider who drew the short straw received a call asking how he would like to pay for the vehicle, whether he wanted to book a test drive and informing him that he would have to bring both parts of his driving licence. There are various payment options available and the pros and cons are listed on the site. Credit card payments incur a 2.9% premium as do bankers draft and, believe it or not cash and there is a cash limit of £9,000 (something to do with European money laundering rules). So don’t go up to Autoquake and ask “how much for cash?” as you’ll end up paying more! BACS, CHAPS and debit card have no additional fees so we opted for debit card.

There are two collection centre’s one in Birmingham and the other in Leeds and as Birmingham was closer we chose that one. Our man travelled up from London by train and after a small amount of confusion (apparently there are a lot of similar looking industrial estates in the area) he made it to the entrance. After telling a slightly confused security guard who he was, a young lady appeared from a pre-fabricated hut to greet him. He was then taken to another hut where he was told to wait. After a short while another employee came through and asked for our man by name and showed him to our Leon. He was asked to have a good look around it and someone would be out to see him shortly. Well he certainly had plenty of time to investigate the car, and in fairness it was exactly as described, as it was about half an hour before he saw anyone again. This time another male employee came over, apologizing for the delay (something to do with having new offices built). He took our man back to the pre-fab, photocopied his licence and asked whether everything was OK with the car. And it was, apart from some mist inside the rear lights which our man was assured was just from the pressure wash and would dry out.

The test drive was literally around the block and our man hardly got out of 3rd gear. He enquired as to whether all the test drives were that short and was told that longer ones could be “arranged” but was left with the feeling that this guy was in a hurry. At the end of the day that suited us fine but some people may want a bit more “touchy feely” and if that is the case then they may be better suited to the full dealer service rather than “no-frills”, whether they would be prepared for the extra cost that is another question.

Back in the hut to do the paperwork our man was given the extended warranty and GAP insurance sales talk, which is fair enough and it was by no means a hard sell.
One thing we should point out is that they do not have road tax on the cars but do offer a 10 day cover note facility so that you are able to get the car taxed as soon as possible. It is obviously not practical to keep all the cars taxed, and as they are on private land this is OK, but taxing the car is obviously the responsibility of the new owner so unfortunately it means you either have to search out a local post office or drive home without tax, and if you do get stopped there is a chance you would be prosecuted for failing to display a tax disc. A traffic cop known to us says that they usually see if you “Fail the personality test” – in other words they use their judgement and discretion and of course you would be armed with your cover note and the hand-over documents for the car so we doubt it would be a problem.

Considering our man arrived at the Autoquake pickup point at about 2.45pm, and actually left at about 5.15pm, it seems the process can be a little slow but the service was polite, friendly and generally efficient all the way through. Their site in Birmingham is obviously being renovated so we’re sure that things will be a lot more efficient in the future.

As for the car itself, as we said it was exactly as described and was in excellent condition throughout. Please draw your own conclusions from our description of Autoquake’s service but I think it’s safe to say that there is very little to poke holes in. Of course we did not ask for a refund and cannot tell you what you might experience should you request one but if all the other aspects of the service are anything to go by we feel confident that you shouldn’t have any problems.

Is the internet the future for used car sales? Well we might not be quite there yet but one thing’s for certain Autoquake takes us a good deal closer.