Dealers and private car sellers need to understand that buyers have more information than ever before and adapt accordingly. Buying and selling a car has traditionally been transacted in a ‘lemons market’, but changes in technology are giving consumers more information and reducing the risk of making bad purchase decisions.
At the recent AADA conference attendees learned that the average consumer spends 7 hours online researching before they visit an automotive dealer, at which point they know exactly what they want, and may have even already obtained pre-approved finance. This behaviour is in line with other buying habits for considered purchases.
In a pre-digital market for cars, sellers possessed more information about the vehicle than the buyer. Price comparisons were more difficult and research into important numbers such as fuel efficiency and safety ratings was time consuming, often made more difficult by manufacturers or dealers hiding information. In the used car market, the seller also knew more about the true condition of the vehicle than potential buyers. The seller knows of any hidden defects, mechanical problems, or accident history that are not immediately apparent to a buyer during a casual inspection.
This information asymmetry was one of the causes of a ‘market for lemons’. Sellers of low-quality (lemon) cars are more likely to sell, while owners of high-quality (peach) cars may withhold their vehicles if they cannot secure a fair price. This leads to a market dynamic where the presence of lemons drives down the average price buyers are willing to pay, reflecting the risk of purchasing a subpar vehicle, and further exacerbates the prevalence of lemons in the market.
Dealers at the AADA conference in Melbourne were told that they need to accommodate an end-to-end customer onboarding process that is omni-channel, allowing buyers to transition smoothly from digital to physical and back. In other words, it’s more and more common to see buyers in a forecourt or showroom checking information via the internet in real-time, comparing prices, reading reviews or even having a video call with a trusted ‘expert’.
AutoSettle – Transparency in the Car Market.
The AutoSettle platform is designed to give both buyers and sellers the information they need to make the best deal. The system replaces laborious manual processes with automated digital journeys which involve multiple parties including lenders, insurance companies and regulatory bodies.
The use of digital identity protects buyers and seller, reducing fraud risk, data breach risk, and ensuring regulatory compliance. For dealers, this results in faster and improved customer experience, ensuring customer loyalty.
Solving the Lemons Market for Car Sales with AI
The product team at AutoSettle are also thinking about how to improve the customer journey using artificial intelligence and innovative digital solutions.
- AI-powered Vehicle History Analysis: Analysing a car’s history report, maintenance records, and accident data against larger data-sets may identify potential problems. AI can diagnose patterns that human inspectors might not see, allowing for more targeted assessments of vehicles.
- Automated Inspection Reports: AI may be used to look at images and videos of a used car to detect signs of damage, wear, and tear. This can provide buyers with a more objective assessment of the car’s condition, beyond the seller’s description.
- Market Value Prediction: We can compare car sales data to estimate a car’s fair market value. This empowers buyers to avoid overpaying for lemons and negotiate with confidence.
- Recommendation Engines: Using our platform data combined with partners across the industry, we can use AI to recommend similar cars based on a buyer’s preferences and budget. This helps buyers discover good deals on cars that meet their needs, even if they aren’t familiar with all available options.