How Tesla has improved
the process of buying any car
I bought my Tesla in 2015 and I only half-joke that it is my
largest online purchase ever. I did
everything other than take delivery of the car online. While I did get on the phone and ask a series
of technical questions, like “How long will the battery last?” and I did meet with
Tesla sales people in their showroom, that was nothing but research. I did also complete a well documented test
but the final decisions regarding options, color and purchase vs. lease were
all done online, not to mention putting down a deposit and frankly, managing my
ownership of that same car through my profile on the website ever since taking
delivery. No visit to a dealership
required. You cannot do that with any
other vehicle that I am aware of.
This comparison arises because my wife and I just went
through the process of buying her a new car.
A GMC truck. It seems, however, the experience we had, and have repeated
a few times with other new car purchases in the past, is virtually the same
regardless of the make of car. These
days, all automakers (in North America at least) have a website where you can
“Build your vehicle”. It is straightforward;
pick the model, color, drivetrain, interior, wheels, options, etc. When you have done all that, you get handed
over to a Dealer. Why? Because consumers never actually buy a car
from GM, Ford or any other automaker. By
law, we can only purchase cars from dealerships. That is what Tesla has eliminated with their
new sales model and why you could not buy a Tesla in New
Jersey, Arizona, Michigan, Maryland and Texas
initially because those states maintained laws that prohibited consumers from
buying cars direct from automakers.
It seems a little crazy that consumers are prohibited by law
from buying a car direct from the automaker but it is not nearly as bizarre as
the arcane system dealerships have trapped themselves and their customers in
for the purchase of a vehicle. While it
may start on a website these days, it always ends in a dealership and with a
multi-step process that is so inefficient, painful and disjointed that it makes
Soviet era Russia seem modern.
First, we start
with the salesperson. The smile, the pitch,
the useful information about each model, perhaps even the white shoes with
white belt. All of it designed to hone
in on the “right car for you”. You may
already have done that on the website so next is the Test Drive.
Thetest drive is an obligatory process and
one even purchasers in Tesla’s new sales model of car buying want to do. Some dealers will even bring the car to your
home at an appointed time, as Tesla will do, to make this second step as
seamless and as fun as it should be.
The third step is
the price negotiation; options, color, interior, etc. Didn’t we already do this on the website? Perhaps, and that may speed things along
except for the fact that in the dealership model the cars in inventory are the
ones the dealer wants to sell you. As a
result, the sales person engages in this annoying process of matching what they
have to sell you with what you actually want.
Okay, but why can’t you just make what I want like Tesla does?
The fourth step
(or is it step 3b) where the sales person searches for the car you are looking
for. Where Tesla simply builds the car
you have designed, dealers actually own the cars on their lots so the
salesperson will direct you to a vehicle as similar as possible to the one you
want on their lot or on another dealer’s lot elsewhere. If you choose a factory order, it seems that
all price negotiation goes out the window.
The “customization” within the dealership model appears to be the salesperson
selling final add-ons like undercoating (famous for being something that
provides un-needed protection at some cost to the consumer and a tidy profit
for the dealer), theft protection, Sirius XM radio or other after-market products
The next step
is when the sales manager is brought in to “finalize” the sale.This always seems to me like the salesperson
you have just been dealing with for the last hour is not authorized to close
the deal.Like they are in training or
something, so they need to bring in the manager to finish it all off.That can get a little sticky but once you are
through that step you can press on…
If you are leasingthe vehicle you next go to the finance
or leasing department, something you would have to do even if you were leasing
a Tesla, but it is yet another step, it involves yet another person in another
office and it can take an hour itself as you comb through the most confounding
mathematical exercise ever conceived. I
have spent my entire 26 year career in finance, and consider myself fairly
sophisticated in understand quite complex financing structures, but the leasing
department takes the prize for most complicated and opaque. Even after an hour of checking and
re-checking certain figures to ensure I understood roughly how they were being
calculated, there remained portions of the calculation I simply had to take
their word for how it was being done.
Most consumers, I believe, simply focus on the bottom line which is the
monthly payment. And frankly that is how
most cars in North America get sold – it is almost entirely a function of the monthly
payment. In our purchase, we were now on to the sixth step but it was dark by
now, and I was feeling defeated by the army of dealership soldiers I was
working my way through.
The sixth step
was insurance. On to another office
within the dealership, yet another person involved in the process (we are at
four so far, not including the receptionist).
Auto insurance is a necessity but now it is approaching 10pm and we are
hours into the process. The sun has long
set and I have to leave to pick up one of our kids so my wife presses on with
the actual delivery of the car. Are we
at step seven? I lost track. A brief explanation of the many features of
the new car, a fifth person to affix the license plate, insurance sticker to ensure
this hulk is roadworthy and we are finally done. Any remaining explanation is left for another
time because the purchaser has long since run out of interest in the
process. Phew, can I go home now?
As it turns out, the dealerships, and the car companies for
that matter, don’t make much money selling cars. All the profit for the dealer is in the
optional extras sold at the end and the follow on service of the vehicle. And in the lease. I recall seeing a brilliant comment by a research
analyst covering the auto sector that truly captured the essence of the auto
business: in this case it was Ford being described a money-losing manufacturer
of cars with a profitable bank on the side (referring to the fact that they
made all their money leasing cars, not selling them).
How does it work when you buy a Tesla? Well, when you make the decision a bright
light appears, angels sing and and the car appears in your driveway.Well, not exactly but it sure seemed like a
close description compared to buying a car from a dinosaur dealer.
As I stated above, I consider my Tesla to be
my largest ever online purchase.Once I
had configured the car on their website, put down a $2,500 deposit with my
credit card, I got a message:“Thank you
for your purchase.We will hold your
deposit for 10 days before starting the build process.You are able to make any changes to the
vehicle whatsoever during these 10 days.At the end of the 10 days we will send you another email notifying you
that we have taken your deposit are about to start building your car to your
specifications.You can still make
changes but some changes may result in an additional $500 charge and/or a
change in the delivery date.”Presumably
you can change something like the wheels anytime prior to when they are put on
the car but changing the color after it has been painted would result in a
charge and a change in the delivery time.A little less than two weeks after the deposit was taken I got a VIN
number and a couple of weeks after that the car was made and I was selecting a
delivery date.Now that was simple,
transparent and it felt custom made.But
not exactly rocket science, and I still had to take delivery.
When it came time to pick up the car it was such a
completely different experience from the GM dealer. The same obligatory details needed to be
completed such as lease details if that is your choice, and insurance, but at
Tesla they are all handled by the same person.
One person. Not multiple
departments. And all while I was seated
in the same chair. The vast majority of
time I spent at the dealer receiving the car I had bought was all spent
learning how it works, basic features and simple setup (like how to charge it,
connecting to Bluetooth or where the windshield wiper fluid is refilled). All the awkward steps involving multiple
people, separate departments and individual offices each run by a specific
manager had all been taken care of online.
Why? Because I was buying the car
from Tesla, not from a dinosaur that already had an inventory of cars they
needed to move. My car was factory
ordered, made in three weeks and delivered in another three weeks. The price was the price and the only haggling
arises if you are factoring in the value of a trade-in.
The best part is, this way of buying a car is not
proprietary to Tesla. Anyone can do
it. The traditional auto makers,
however, would have to unwind their entire dealership network in order to do
what Tesla does so it is not likely to happen with them anytime soon. Hopefully, the moment one auto maker adopts Tesla’s
online configuration and the direct purchase model, the others will be forced
to follow. And then, the painful,
exhausting and unnecessarily complex process of buying a car will be replaced
with something more akin to a purchase on Amazon.