There are lots of opportunities for innovation in the used-car space for dealers.

In fact, some may say it is a hotbed for new ideas. 

“I think a lot of the most exciting trends in automotive buying are going to be led by used-car retail,” Aaron Krane, the chief executive of Drive Motors, which develops online car-buying solutions for dealer groups and banks, said in a phone interview.

“So, I think the used-car space is actually oftentimes the vanguard for (innovation), whether it’s online buying or any of the other new experiments in that space.”

 One example is the work dealers are doing with Drive Motors, which gives dealers a way to turn existing websites and stores into digital buying platforms.

 “But that’s only one, let’s say, vector of innovation that used dealerships are exploring. That’s the one that we happen to offer, but there are others as well,” Krane said, going on to mention things like on-demand test-drives and retargeting.

Over at the EchoPark Automotive line of used-car standalone stores (the focal point for Part I of this story) one potential area for continued innovation is online sales.

Jeff Dyke, who is president of EchoPark and parent company Sonic Automotive, said in a November interview that EchoPark prefers for 90 percent of the deal to be complete before the customer gets to the store. They have not yet launched tools that would let the consumer do the entire transaction online (as of that interview),  but at the time of that interview in late November, Dyke was set to show that technology to the executive team.

One of the pluses to the technology that EchoPark and Sonic have is that they utilize their own appraisal system, whereas most companies that sell cars online use an outside system, Dyke said.

With EchoPark’s process, customers would be provided a car-cash app through the app store, where they would take a photo of their vehicle, just as an EchoPark associate would at the store.

“They can fill out the same condition report, and it will go straight from the customer to our RTC, and our RTC will respond back to the customer,” Dyke said. “And so they’ll get that information, and then they can complete their own transaction online, set up their own financing, do everything right there online. We’ll sell them the products online, the whole nine yards,” and then the consumer can pick up at store, he said.

As for delivery, there “probably” will be a day where that happens, but it makes things more complex, and they’re not quite there yet, Dyke said.

“I’ve got five priorities in my new role as president of this company, and one of them is to be able to sell online — but to do it really good, and to have the same experience, the same culture in your Web visit as you do in your brick-and-mortar visit,” Dyke said.

Sonic’s peers certainly have noticed the importance of this space.

AutoNation was the lead investor in an $146 million funding round for online car retailer Vroom, which officially announced the Series G round in December. AutoNation had announced its piece of the investment in late October, saying it obtained roughly a 7-percent ownership stake in Vroom after a $50 million strategic investment in the online car retailer.

With its $54 million investment, Lithia led the $140 million round of Series D financing in online marketplace Shift that was announced in September. Lithia and Shift also formed a strategic partnership, and Lithia president and chief executive Bryan DeBoer joined Shift’s board of directors. In October, Lithia said it had acquired more equity interest in the online marketplace.

Krane, the Drive Motors chief executive, said he believes this will be the year that, “online car buying reaches and passes the tipping point.”

“2019 is the year where every dealership realizes they need online car-buying, just like every dealership realized a decade ago they needed a website with inventory,” Krane said. “We see this on every level, from the manufacturer through the large publicly traded dealer groups on down to the smaller one- and two-store dealer groups. Quite frankly, 2019 is just the year that I think the entire market embraces online buying, and of course, they’re going to embrace it in various ways.”

Some groups might utilize third-party platforms, some might utilize subscriptions, while others might bring online buying to their existing experiences, which Krane believes will be most common.

“Much like we’ve seen in every other vertical, there will become an arms race or a land grab or whatever you want to call it,” he said. “And the early movers are going to benefit, much more than the mid-to-late movers. 2019 is probably the last window to be an early mover in online buying for dealerships.”