Is online car buying the new wave? Canadians are getting automobiles delivered to their doorsteps

Shannon Jackson had bought books and shoes online in the past.

But never a $16,000 purchase before.

That is, until May, when she got a white 2020 Hyundai Elantra delivered right to her doorstep through an online car retailer called Clutch.

“I didn’t set out to do that in the beginning,” said Jackson.

“There were a few things that I liked. The fact that they showed these closeup pictures of every imperfection gave me some comfort that they weren’t hiding anything,” said Jackson.

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Jackson did hours of research on the vehicle. She said she found all the info she needed on Clutch’s website — the CARFAX and inspection report, owner history and financing options. The car was also at a competitive price, around $2,000 less than what she was seeing at dealerships.

But she was still skeptical about coughing up thousands of dollars in a matter of minutes online, to the point she went to a dealership that had the same car and test drove it.

“We started the process of initiating the purchase, and I got really nervous…. I’m spending 20 grand having driven around a block.”

Then she thought back to Clutch’s 10-day, 750-kilometre “test own.”

“We call it a test own and not a test drive,” Clutch CEO Dan Park told Global News.

“You can kind of go about your life — put the car in the garage to make sure it fits, run groceries, put your kids inside it to make sure it’s the right car for you. If for any reason it isn’t, you can return that car. We’ll pick it up and return every penny back to the consumer.”

Clutch has been around since 2017, dubbing itself Canada’s first online car retailer. The company is fully licensed and regulated by the Ontario Motor Vehicle Industry Council (OMVIC). Clutch operates in Ontario, British Columbia and Nova Scotia, and has about 1,000 cars in stock, according to its CEO.

Park says the automobile industry has been working to break through the world of e-commerce since way before COVID-19, albeit very slowly.

But the pandemic forced dealerships and customers to get behind the idea — and fast. More Canadians are browsing and buying cars from start to finish online.

“We saw a new demand being created by people that didn’t feel safe anymore using public transit or ride-share services,” said Oumar Dicko, chief economist at the Canadian Automobile Dealers Association (CADA).

“We saw a rapid, a massive shift…. Within a couple of weeks, dealerships were able to reset the whole business operation to be able to offer online sales to customers.”

Despite an initial sharp drop in sales last year, Dicko says the sudden demand caused car purchases, even online, to shoot up. This outpaced the supply and created a shortage, especially for used cars.  That, in combination with a shortage of semiconductor chips, made vehicle prices soar.

But the demand for vehicles during COVID-19 also made a service that was once seen as a luxury now accessible to the masses: test drives straight to your doorstep.

“I don’t think customers miss anything by purchasing the vehicle online,” said Dicko.

While exact numbers of online sales are still unclear, Dicko says it appears younger, more tech-savvy, first-time buyers of used cars got behind the idea of online car shopping fairly quickly.

But that doesn’t necessarily mean in-person dealerships are becoming obsolete.

“We know that people still like to see, feel, test drive the car,” said John Carmichael, CEO and registrar of the Ontario Motor Vehicle Industry Council (OMVIC).

“Buying a car today is the second-biggest purchase you make in your life outside of your home…. I’m hearing more and more people who buy online still like to go to the dealership” said Carmichael.

Dicko says this rings true in studies.

According to a CARFAX Canada survey of 2,000 individuals, only eight per cent of Canadian buyers of new or used vehicles want to buy their next vehicle online and have it show up at their doorstep. The remaining 92 per cent would still prefer to buy a vehicle at the dealership.

This makes Carmichael and Dicko believe the industry will take shape in hybrid form: browse online, buy in-person.

Nonetheless, the fully online retail experience seems to be working for some.

“There are companies around today that are selling a tremendous amount of vehicles without a consumer ever sitting in the driver’s seat to see if the car is right for them,” said Carmichael.

That’s not a great idea if you’re dealing with a private, unregulated seller on a marketplace site, says Shawn Vording of CARFAX Canada.

“I would suggest that majority of for-sale-by-owner vehicles on those marketplaces are legitimate people selling legitimate cars. That said … there’s inherently more risk.”

In 2020, the Better Business Bureau received 260 reports of online car scams, with losses coming up at $650,000.

“The best practices still apply: ask for a Carfax history report, test drive the vehicle, have it inspected by an independent third party, and, of course — unlike a dealership, which is regulated — never send money in advance of actually purchasing the car or seeing the car,” said Vording.

And if you’re selling your car, never accept a cheque, because it can bounce back.

If a seller is legitimate, Vording says they should be willing to meet in person, show you the vehicle and talk about its history. And if the deal is too good to be true, it probably is.

As for Jackson, as long as she does her research and covers all her bases, she says she’s officially an online car-shopping convert.

“I will never buy a car another way, having done it this way,” she said.

And this business model is here to stay, according to automobile experts, even long after the COVID-19 pandemic ends.

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