Americans rethinking how they buy cars.

A new study shows car buyers around the world, including in the U.S., are changing how they buy new cars and trucks.

Multiple visits to a series of dealers are out, while the trend of consumers doing more advanced research ahead of buying a car is in.

(Read more: Tesla up, Ford down: 'Consumer Reports')

"This is the most dramatic change we've seen in the auto industry and how people buy cars in the last 50 years," said Hans-Werner Kaas, McKinsey's senior partner.

Kaas and his team conducted their study by looking at consumer auto buying patterns at dealerships around the world.

Tim Boyle | Bloomberg | Getty Images
A sales representative assists customers at Golf Mill Ford car dealership in Niles, Ill.

The conclusion: Car buyers are doing more of their own leg work online and spending less time at dealerships.

Fewer dealership visits

The McKinsey report says the average buyer visits just 1.6 auto dealerships while car shopping, down from 10 years ago when buyers visited an average of five dealerships.

"The consumer now has more information online and through other sources, so they do not need to visit as many dealers," said Kaas.

(Read more: February auto sales beginning to thaw)

Simon Soaf, general manager at Mossy Volkswagen in Carlsbad, Calif., has seen the change.

"Those days of going to six or seven dealerships to shop for a car are over. It is not going to happen again. Customers are more savvy," he said.

Soaf says the internet has become a major player in driving sales. He estimates that almost all of the customers at his dealership has done some type of advanced research on their own before entering the showroom.

As a result, fewer people are coming in to "kick the tires" and just look around as they did 10 or 15 years ago.

"The business has changed," said Soaf.

Less haggling, more time saved

When Mona Giamanco decided she wanted to buy a new car, she was dreading running around and visiting car dealers. So she joined the growing numbers of car buyers making their purchase through a third party referral.

In her case, it was Costco.

(Read more: More city dwellers beginning to steer clear of cars)

Last November, she picked out a Volkswagen Passat on the Costco Auto Program website. The retail giant put her in touch with a local Volkswagen dealer who had the Passat at a preset price.

Within 48 hours Giamanco bought her Passat for less than the inventory price.

"In the past I would hop from dealership to dealership, taking several weekends, combing the lots trying to get a deal," she said, "But this was so much easier."

Costco Auto Program sales surging

This year, Costco Auto Program is expected to sell 375,000 new vehicles.

Who's buying?

Most of the members buying new vehicles are looking for three things: A good deal, no haggling and not to waste time.

"We really save the members a lot of time by doing all that legwork on their behalf," said Jeff Skeen, general manager of Costco Auto Program. "They would rather spend their weekends doing something else than haggling with car dealers."

Skeen says Costco car buyers wind up paying about $1,000 less than those who visit dealers on their own trying to get the best deal possible.

(Read moreMoney worries keep Gen Y from buying, leasing cars)

The 3,000 dealers paying Costco Auto Program for referrals are part of the program because they'll make money down the road servicing the cars they sell. In addition, members tend to have higher credit scores, so closing deals is not an issue.

Is Costco Auto Program the way all cars will be sold in the future? No.

But Kaas and his McKinsey team say this is an example of how the car buying experience is rapidly changing.

"The consumer still uses the auto dealer. Those who can change with their customers will succeed," Kaas said.



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Comment by MANNY LUNA on March 4, 2014 at 10:37pm


David is a true pro and the greatest at getting inside of the best car minds!*****LOL

Comment by Brian Bennington on March 4, 2014 at 4:06pm

Manny, First and most important, I thought you understood not to use my "Brain" nickname yet.  It's only for those who've known me for awhile.  When we're better friends. it'll be OK.  And, it's not "Brain," it's "The Brain"!

Reading David's multiple responses to my bio inquiry, there's no question of his car business expertise.  His auto management experience gives him a well-seasoned view of the numbers and mechanics of dealership operations.  However, what's with this "getting inside the best car minds."  That, in itself, is a dangerous proposition.  It is definitely not a safe place to prowl around.  I've heard of people climbing in there and not being able to get out!  Hopefully, David will keep posting, just so we'll know he's OK!

Comment by MANNY LUNA on March 4, 2014 at 4:07am


David is a true pro and the greatest at getting inside of the best car minds!


Comment by Brian Bennington on March 3, 2014 at 10:53pm

Excellent, David, that's a nice bio!  But, before I comment further, I'd like to thank Manny for this opportunity to get to know you better.  Now, back to you, David.  I did note your ADM bio was stronger than your bio in DE.  You sound like that rare type of guy who's successfully challenged both corporate and entrepreneurial environments, and is still up for new adventures.  It's enough to make my "BD" act up.  ("BD" being "biography dysfunction," not to be confused with the infamous "ED.")  However, your schedule sounds much too tedious for me.  One of my few wishes is that I never have to ride in the "metal tube in the sky" again.  Plus, I haven't bought a suit in ten years.    

Really, the only thing I like to do is "ghostwrite" letters for my client dealerships' reps.  That, and help them "see the light" about follow-up.  And, nothing does it like when I've taken their words, "reconstructed" them, and they read the letter I wrote, smiling with pride knowing their customers will read it and immediately know how much they're admired.  I'm sure you know how profitable consistent personal follow-up can be, but when the ghostwriter engineering it happens to be a multiple-make award-winning rep and a genuine "blue skies" professional sales person with 20+ years of follow-up writing skills, their enhanced customer relationships and the much-easier-to-sell repeat and referral business they generated, makes them "true believers" and my biggest fans.  The real "kicker" is, I can't find anyone who does it as "personal" as we do.  (No one I've heard about is even close.)

Very likely, that all sounds rather boring to you.  Just understand I'm a "one-trick" pony, compelled by mastering the art of relationship building.  Early on, I learned the best, most trusting and reasonable and, of course, least price-dependent customers were my repeats and their referrals and I devoted my selling career to capturing as many of them as I could.  And, in doing it, I learned (especially here in the SoCal auto market) that many became my customers, not the dealers, and they'd actually follow me if I changed dealerships.  Sorry to go on about my "love," but it is my one and only career.  Except, I dropped out of college to travel around playing R&R for eight years in the '60s & '70s, then had a R&R management agency for six years, then sold for and owned a home keyboards store, them moved to CA and sold cars for ten years, and finally, I've have had my Relationship Centered Marketing business (Archer-Profit Associates) for the past 20+ years.  Gotta go now as my dog, who comes to work with me every day, has announced it's time to take her out.           

Comment by David Ruggles on March 3, 2014 at 12:15am

Brian - I sold my first car in 1970.  Actually, it was a lease.  I became a manager in 1977 and a junior partner in 1979.  I've operated dealerships in both IA and Chicago as either General Manager or Operating Partner.  I spent some time buying and selling high line exotics before deciding to change my career path and went into training and consulting.  I've done dealership consulting, including desking and F&I all over the country and in Japan, where I did a month every year for 18 years.  I currently am involved in a number of projects, including an effort to bring pre-owned leasing back to the business, and write columns for WARDs and Auto Finance News regularly, and other publications intermittently.  I partner in a blog called autosandeconomics with economist Mike Smitka.   

Comment by David Ruggles on March 2, 2014 at 11:58pm

RE: " Face it, disliking the car buying process is an institution."

This has always been the case with merchants selling big ticket items in a negotiating environment.  This has always been the case in the auto business.  This human nature has NOT changed.  And consumers have always had the option to shop until they find a dealer that pleases them or until the become worn down and give in.  Dealers need to make about $3K per transaction.  If someone gets a $2K deal, someone has to pay a $4K deal to maintain the average.  That's the math of the business.  That's also what consumers don't like.  Those who don't have the stomach for the realities of the business need to find some other career path.  Unless the FTC changes its policy on price fixing, it will stay this way.  Dealers understand it.  They live realities their employees often don't understand.   

Consumers buying cars have never had it so good.  And they still aren't satisfied.  That should tell you something.  Dealers don't need to change the overall image consumers have of the retail car business.  The need to earn customer's business one deal at a time.

Comment by Brian Bennington on March 2, 2014 at 11:28pm

"Top of the day" to ya, David.  Always curious to review your comments, especially when they involve an "overview" of the industry. Today, you moved me to stop working and respond.  While it's easy to dismiss what Scott Painter says as it's usually conceived to advance Scott Painter (this guy is his own publicist and he's good at it), his prediction might be accurate.  But, not because of any other reason than it's just his time to be "right."  He's like an Elon Musk "lite", who's also a damned good self-publicist, riding the crest of "their time."  Look at the problems they've overcome.  They both seemed to have found "Favor with the Gods," at least for the time being, as you know how fickled the "Gods" can be.  The only insight I can offer to substantiate when the "ceiling" is approaching is that old adage, "Follow the money," which in this case will be the manufacturers' incentives.  Did you see the new ones GM just put in place?

Painter might be an innovator, of what looks like an updated national version of the local independent leasing companies, but he's just capitalizing on a business model that thrives on the fear people have of "getting screwed" by their local car dealerships.  Of course, we know it's not like that now in this age of acute consumer awareness, but you can bet that he and those with him and following him will continue to vilify dealers, directly and indirectly, 'cause it's good for their "bottom line."  This will not change, even if some reporter "uncovered the true cost of 3rd party vendors" and it made national news.  Face it, disliking the car buying process is an institution.  However, all you have to do is see it for the marketing problem it is, and work around it.  Talk of "push back" or some form of "retribution" is both pointless and counter-productive.  And, I'd be hesitant to assume knowing how dealers, as a group, look at their business.  Personally, I know dealers using 3rd party vendors and some who don't, and they're all nice folks.  As I reflect on it, maybe the dealers who are more inclined to use them do it because they are less inclined to believe their sale team can get the numbers they want without them?  

Of note, David, I read your bio.  I knew I had read it previously, but I couldn't remember what you did.  Then, when I read it again, I realized why I couldn't remember.  It doesn't say much, other than you're President of Advanced Concepts & Techniques and WARDSAUTO.COM. and you've had 40 years in the auto business.  Granted, I'm not the "sharpest pencil in the box," but I'm still left guessing, and with ADM's regular exposure to our industry's best and brightest, a little one-stop "pitch" on your bio here might be in order.

Luckily, I only sold cars for ten years, because it allowed me to spend 17 years before that learning how to sell truly non-essential (absolutely no need for them) high-ticket (average cost the same as a midline automobile) organs & pianos to a vast majority of people who didn't know how to play them.  (To simplify the comparison, it's just like selling cars to people who can't drive.)  I was successful enough at it and gained enough recognition I was appointed their youngest dealer in history by, what was then, the most prominent and profitable keyboard manufacturer in that industry and I didn’t even know how to play.  (Guitar was always my instrument, but you couldn’t make money selling them.)  Honestly, the importance of that in my life dwarfs in comparison to the understanding of “selling” I learned doing it, and that’s been the foundation for the business I’ve operated for the past 20+ years.  All things being equal, car sales reps would benefit mightily if their background included selling real “blue skies” products like jewelry or yachts.   

Comment by MANNY LUNA on March 2, 2014 at 12:26pm

Dealers need to give them what they're searching online and they will give you the time and money:)

All dealer website content needs to be changed the way shoppers are searching online!

Comment by David Ruggles on March 2, 2014 at 8:16am

Scott Painter says the ceiling is 20 Million SAAR.  All we have to do is eliminate the friction in the buying process.  Anyone believe that?

When we hit the "ceiling" previously we bounced off of it for years, staying fairly close year after year.  The current market still contains a HUGE amount of pent up demand.  Many consumers have a want and a need but have to rebuild their credit score.  But there is another ceiling to be mindful of.  We have an industry full of third party vendors who demonize dealers in general in an attempt to convince consumers to let them help them buy a car and save them from those nasty old car dealers.  Many of those 3rd party vendors depend on dealers for their revenue.  That's what bit TrueCar in the ass.  TrueCar touts transparency but certainly doesn't tell their consumers about the $300. of cost they add into the deal.  They don't tell consumers they have changed their business model to help dealers make profit.  The consumer perception is that TrueCar is still trying to force dealers to sell cars for less than they should. 

Now we have Kelly Blue Book, part of the Manheim, AutoTrader conglomerate.  Kelly demonizes dealers and helps consumers buy cars for less than they should.  Yet, the umbrella company depends on dealers for the bulk of its revenue.   I'll go on record as predicting another round of dealer push back which is its own kind of ceiling.  

The facts of life in the retail car business are as follows:  Dealers need to average around 10% per transaction on new vehicles.  That's about $3K front and back on the average new vehicle.  If someone gets a $2K deal, someone has to pay a $4K profit to maintain the average.  When the 3rd party lead generators began doing business in earnest, dealers could look at the additional leads as "plus business," like they look at the fleet business.  Now they look at their business and its ALL fleet business.  They find themselves in the classic conundrum of cutting price and expecting to make it up in volume.  But they're not. 

Something's got to give.

Comment by Brian Bennington on March 2, 2014 at 3:34am

Wow Manny, what a timely post!  Everything you've stated is happening in spades.  But, you didn't mention the giant "collision" we're rapidly approaching.  That's when new car unit sales hit the well-acknowledged 16.5 million to 17.5 million ceiling of the US market.  We've been increasing sales at a million plus every year since the bottom fell out in '08-'09, and at the 15.5 million we did this year, we're closing in on that "ceiling" fast. You can bet it's sure to "rattle" the double-digit percentage increases nearly every manufacturer is promising.  Or, as that old Johnny Mercer hit that Fred Astaire sang in the 1955 movie of the same name proclaimed, "Something's gotta give"!  (Yea, I know I probably should have referred to the Jack Nicholson/Diane Keaton movie with that name because most people don't even know who Fred Astaire is, but hey, I'm an old guy!)

And, adding to the pressure and confusion is the growing number of "3rd party" players, offering their services to keep the dealerships honest and "true" in their pricing.  Really, there's bound to be more of them, too, because all they need is Scott Painter ambition, big buck advertising and a small sales force to intimidate dealers into signing up.  How can they go wrong?  A percentage of the profit of cars they not only don't have to stock or show, they never even have to meet the buyers.  I'd bet we haven't witnessed all they are capable of yet as I predict they'll eventually not only want their fee on the purchase of the customers they refer, they'll try for a fee on every vehicle those customers return to buy from that same "contracted" dealership.  And, don't be surprised if some dealers go for it!

For you Manny, there's a lot of opportunities brewing, as your personal SEO expertise and the "Search Engine Domination" your VL Automotive Marketing is known to deliver, definitely puts you in the "catbird seat."  I'd say, with all that's coming, your services will be in bigger demand than ever.  I'm only thankful my Archer-Profit Associate's Relationship Centered Marketing business is more complementary than competitive with a powerhouse like VL Automotive Marketing.

That's because our direction is exclusive to generating repeat and referral business.  You help dealers bring new customers into the dealerships and we'll do what we do to keep them coming back as well as sending their friends and family into do business with our client dealerships.  It could be a "match made in heaven" in a market that's heading for a helluva ride!               

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