New car buyers still overwhelmingly favour interacting with Dealers, and are confident in the process of finding and buying a new car, according to new research undertaken on behalf of the AADA.

Zing! Insights conducted an online survey of 500 Australian new car buyers/intenders in order to gain an insight into the perspectives and preferences of the new car market consumer, with relation to interacting with new car Dealers.

The research sought to canvas views of Australian new car buyers and intenders across some particular areas relating to their vehicle purchase behaviours, including:

• confidence in participating in the new car purchase process and specifically interacting with Dealers;
• priorities in the vehicle purchase process;
• perspectives on the manufacturer-driven agency model and perceived fit for the market; and
• testing planned engagement with electric vehicles/hybrid vehicles, and measuring barriers to engagement.

The goal of this research was to assist the AADA with understanding the current needs and priorities of the new car market buyer, and specifically to understand the potential impact on consumers of the agency model of buying a vehicle (as opposed to a Dealer-led model).

Key Findings

• 94% are confident in the process of finding and buying a new car;
• 87% are confident in interacting with a new car Dealer; and
• 90% say that the ability to negotiate price of a vehicle is ‘very or quite’ important to them in context of the purchase process overall.

The report concluded that consumers like the chance to ‘get the best price’ and the ability to negotiate can empower them. The sense was that there should ‘always be room’ for negotiation.

A significant proportion (32%) found the idea of no longer being able to negotiate on price to be unappealing (30% found it appealing), with 52% of those suggested that such a model would lead to higher prices for new cars in the market. Consumers noted the simplicity and potential ‘fairness’ of the agency model, although there was a high level of concern that this would drive prices up.

Confidence in Car Buying Process

In total, 94% of the new car market claimed that, when it came to navigating the purchase process and finding the best car for their needs, they were ‘very’ or ‘quite’ confident. At the other end of the scale, just 1% suggested that they were ‘not very confident’, suggesting the car buying process is familiar and considered easily navigable for the vast majority of consumers.

Reflecting levels of confidence in the overall new car buying process, very high proportions of the new car market say that they are either ‘very’ or ‘quite’ confident in interacting with new car Dealers (87%). Just 2% suggest that they’re ‘not very confident’. From this, it’s clear that the new car Dealer experience isn’t seen as a significant barrier to purchasing a vehicle.

In total, 13% of the new car market rate their confidence as either ‘neutral’ or say they’re not very confident with interacting with new car Dealers. While not statistically significant, women are slightly more likely than men to be less confident in interacting with new car Dealers. Overall, no particular demographic stands out as being significantly less confident than others, highlighting that experiences with Dealers are generally consistent.

Buying a Car Online

When it comes to the notion of buying a new car online instead of at a physical dealership, the market is divided. Around one in three (29%) say that they’d consider buying online, although almost half (46%) suggest that they’d not be willing to do so. This highlights that – at this stage – the opportunity for online interactions within the new car market would be niche, with the majority preferring instead to navigate existing purchase channels.

Importance of Car Buying Factors

In total, 91% consider it important to be able to test drive a car before buying (63% consider it ‘very important’ to do so). Similarly, 90% agree that the ability to negotiate on the vehicle’s price is important as part of the process of buying a new car. This includes 57% who say that it’s a ‘very important’ part of the process. Consumers also value the ability to negotiate on add-ons/optional extras and the advice provided by sales staff. From this, it’s clear that many aspects of the Dealer experience are highly valued by consumers.

The ability to negotiate on the price of a new car in the dealership is something that is highly valued by all consumers, regardless of age, gender or brand of vehicle purchased, with over 90% of every demographic group based on age, gender, life stage, and type of brand bought saying they valued the ability to negotiate.

Value of Car Buying Factors

Over nine in ten (93%) specifically say that they value the ability to negotiate the price of a new car before they buy it. This, taken alongside the levels of confidence across the market in interacting with new car Dealers and the value placed on negotiating price at a dealership, suggests that discussing and negotiating price in-person at a dealership is an accepted and valued part of the overall new car buying process.

For the most part, customers who value the ability to negotiate on the price of a new car say that this simply helps them to keep the price down/get access to a better deal (51%). There’s a sense that negotiating is a part of the process and that customers should have a right to negotiate, while past experience with haggling has been successful. Around one in ten believe that the ability to negotiate gives them confidence and empowers them, highlighting a positive emotional outcome for the consumer.

“Although I know they have ‘negotiable’ discounts built into their bottom line it still feels like you have a little win if you can get a discount or something thrown in,” said one respondent.

“As a single female, I feel like I need these skills for myself, and so I enjoy practising and building my confidence,” said another.

Around half of those who said they don’t particularly value the ability to negotiate on the price of a new vehicle didn’t give any particular reason for this. Another 15% highlighted a sense that the Dealers should just be giving the best price to the consumer up-front, while 10% feel that the process of negotiating can be stressful/difficult.

“I would prefer to have an honest interaction where I am told a price upfront, then I can compare between brands and Dealers before I arrive in person. Haggling over price is demeaning and tedious,” one person said.

Agency Model

When the idea of set pricing/no longer being able to negotiate on the price of a new car is tested, around one in three suggest that this idea appeals to them (30%), leaving 70% who are either uncertain (38%) or who find the idea unappealing (32%). This presents as being a relatively contentious model, with similar proportions engaged and disengaged by it as a principle.

The appeal of the agency model/no negotiating is relatively consistent across demographics, although there are tendencies for it to have greater support among younger consumers, premium brand buyers, and men.
Reasons given by those who found the agency model appealing centred around fairness and the same price for everyone, while those against it were worried it would put them at a disadvantage and lead to higher prices.

Over half (52%) of new car buyers believe that a shift to a non-negotiable ‘agency model’ of selling vehicles would lead to increased pricing for new cars, with one quarter suggesting pricing would actually be lowered (25%). This highlights the extent of concern that consumers in the market have with respects to what fixed pricing would mean for them in the longer-term.

Hybrid & Electric

Just over half of the market (53%) say they’re likely to consider buying an electric vehicle or a hybrid vehicle (57%) in future. In both cases, around one in four are uncertain, and the remaining 15-20% are unlikely to consider such vehicles. Overall, it implies that there’s an openness to alternative fuel sources within the market – whether this converts to behaviour change straight away is another matter.

There are some significant demographic skews when it comes to considering electric vehicles. Men are significantly more likely than women (58% vs. 48%) to be open to EVs, while they are more appealing to those who are buyers of premium vehicle brands (70% vs. 51% for mainstream brand buyers). There’s also a skew based on age – younger drivers are more likely to be open to buying an electric vehicle.

The most common reason for being unlikely to consider an electric vehicle is a concern around a lack of charging stations/infrastructure (69%). Linked to this, 55% have a concern that EVs don’t have sufficient driving range before requiring a recharge. Just under half (49%) believe that higher purchase prices for electric vehicles is their primary barrier to purchasing an electric vehicle.

Impact of Brand Discontinuation

When presented with the hypothetical that the manufacturer of their intended vehicle were planning to pull out of the Australian market five years post-purchase, 45% of consumers say they’d still likely buy that vehicle while 55% would not.