For the last few decades, the second-hand car market has been in a stagnant state – often associated with distrust, inefficiency and a lack of transparency – and with pre-owned car sales dominating the market, it is often the average consumer that suffers most.
This is according to Jamie Surkont, director at used car retailer getWorth, who explains that the demand for pre-owned cars has surged during the past three to four years spurred by affordability and consumer budget pressure with the rising cost of new cars, fuel, insurance, and maintenance.
He says that with that increased popularity of second-hand cars have come new consumer expectations and dissatisfaction with the traditional way of doing things.
Surkont says that there is massive consumer distrust in used car dealers who are often viewed as predatory, and which results in a lot of stress for car buyers and sellers. This is partly driven by a lack of transparency, and buyers and sellers do not have access to the same information as dealers. He says that the industry has been slow to innovate and not much has changed in the last few decades.
He sees an industry in turmoil. “It’s inefficient, and it has managed to survive this way because there is unequal information; in other words, the dealer knows more than the average consumer. Adding to the problem, is a lack of transparency in a number of areas including pricing, condition of cars, and car background/provenance.
“Inefficiency also means consumers struggle to get a good deal,” Surkont explains. “Traditional commission-based incentives (whether from manufacturers, sales divisions, finance and insurance houses) focuses the dealer on their outcome and ‘moving the metal’. This naturally is not always consumer friendly.”
The result, Surkont says, is that the customer, who underwrites the entire industry, is exposed and is unable to make informed decisions and this creates a sustainability issue for the customer which in turn creates sustainability concerns for the industry as a whole.
Current Consumer Trends
According to Surkont, there are some distinct consumer trends occurring in the used car market. These include the fact that consumers have a lot more choice and knowledge. “Previously, trading in your old car was the main option,” he says. “Now you have multiple parties who will buy your car, many of them online and, with the growth of listing platforms like Autotrader and Cars.co.za, consumers are a lot more informed about price than before.”
He says that credit extension is also growing, especially for new cars, and that longer loan periods, lower deposits and residuals/balloon payments are leaving a growing proportion of car owners underwater on their car loans. “It’s a dangerous situation and will cause grief for many car buyers,” he warns.
“Another big trend is that consumers are finding their voice and demanding greater convenience, greater trust and transparency and an all-round better experience.”
With the trend moving towards a larger portion of the car buying and selling experience happening online, he says that there will be some consolidation in the industry and a shift from the plate-glass main road dealerships to warehouse-style sales operations.
He points out that all the above is placing huge pressure to change as well as squeezing profit margins in the industry so that attrition rates in traditional dealers have increased and will increase further.
GetWorth, which recently introduced a new alternative to the traditional way of buying, selling and financing cars with its digitally-based offering aimed at empowering customers to buy and sell cars for what they are really worth is run by four passionate entrepreneurs.
“When founding getWorth we were looking for an opportunity to make a difference; coupled with how frustrated we are by the typical car buying and selling experience and the wealth destruction that many car owners suffer over their lifetime we decided this was a problem that needed solving,” says Surkont.
“We were convinced that there was a better way, which we started addressing when we developed our innovative ‘getMore’ product for car sellers. But we learnt that the challenges ran a lot deeper and that more was needed to give consumers the outcome (and experience) they deserve.”
getWorth, as a brand, is using a mix of technology, new products, different experiences, professionalism, and efficiency to make a difference in an industry that is in turmoil. With their novel products and approach, they aim to revolutionise the used car industry. “We applied novel thinking to our offering with a first for South Africa where the seller gets paid cash up front and the profit when it sells,” says Surkont.
Secondly, he says they don’t just buy any cars. “We are rigorous regarding doing proper background checks on the cars we sell giving the purchaser peace of mind. When you purchase a car from us, we offer getSeven: a 7-day / 700km money-back guarantee, no questions asked.”
He says that this is all underpinned by a focus on the customer through transparency, professionalism and efficiency, designed to empower buyers and sellers to make smart choices and get a fair deal. “And we use data and machine learning techniques to establish realistic values,” he adds.