New Business Models for Car Shopping Take Their Place Among Northwest SA Dealerships

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CarLotz, a consignment store for vehicles is opening a location near UTSA and Fiesta Texas.

Scott Ball / Rivard Report

CarLotz, which uses a consignment model to match cars with buyers, is located on Interstate 10 West.

On any given day, more than 205,000 cars travel the stretch of highway and frontage roads on Interstate 10 West near Loop 1604, making it feel like a parking lot at rush hour.

What the Texas Department of Transportation probably can’t count are the number of cars filling the lots of car dealerships on that same stretch of road.

If it’s a new ride you’re looking for, whether Cadillac or Toyota, or a place to get the best price when you sell, there are dozens of new or used car dealers and car lots in this far Northwest part of town. While some may be household names in San Antonio, there are new places on the block as well, with business models shaped by the digital economy and aimed at disrupting traditional ways of buying and selling a car.

CarLotz San Antonio opened in late November on I-10 West at the former site of an Audi dealership, which moved up the road near Dominion Drive, and between a new BMW/Mini dealership and the Barrett Jaguar dealership.

Based in Richmond, Virginia, CarLotz uses a consignment model to match cars with buyers. The San Antonio store is Carlotz’s eighth location – the first in Texas – and met its goal of selling 25 cars in December.

Individual car owners and fleet owners pay a $199 listing fee, and Carlotz inspects, appraises, details, and lists the vehicles on websites like CarGurus.com and Autotrader.com. Carlotz then negotiates with potential buyers as the consigner’s intermediary. When a buyer comes along, he or she pays Carlotz, either in full or through dealer-provided financing, and the vehicle consigner gets a check minus a $799 fee.

The advantage to the consignment approach over selling via Craigslist or posting a handmade sign in the car window is not having to meet with strangers, said Carlotz Manager Joseph Cavazos. But Carlotz also claims to get a seller more money, even 10 percent more than what the seller could get in a trade-in arrangement at a dealership.

The Carlotz lot holds up to 350 cars, and currently has about 135 available in a variety of makes and models, all pre-owned and priced 8 percent to 10 percent lower than retail, Cavazos said. Half of his inventory is priced between $5,000 and $12,000 and the other half between about $20,000 and $40,000. Most Carlotz locations sell about 60 percent of their inventory in any given month.

Many of the cars Carlotz sells had their first life in a business-owned fleet, like a rental-car business, and would have gone to a vehicle auction if not for Carlotz. That’s where dealers usually pick them up and mark up the price before selling to individual car buyers. But by consigning the car with Carlotz, the fleet owner gets a better price and so does the individual buyer, said John Foley, director of operations at Carlotz. “That side of the business has grown astronomically.”

Another trend, he added, is that car owners who would have previously donated their old cars to charities are instead choosing to consign those cars with Carlotz in order to get their chosen charity a bigger donation.

At Carlotz, no cars are displayed inside the sleek, contemporary lounge where noncommissioned associates help customers shop for cars online using a desktop computer. Cavazos showed off the children’s play area that features an Xbox racing game as another way the company focuses on customer experience.

“The consignment thing is great because it’s something nobody else has done, but to completely disrupt the industry, we needed to take the existing car dealership model and flip it upside down,” Foley said. “Most people want to go to a brick-and-mortar [dealership] and touch a car before they leave, and dealers continue to incentivize their salespeople to close [the deal] … so rather than focus on the experience of people getting there to see a car, they focus on are you going to say yes or no. They end up butting heads, and it’s not a great experience.”

Used car sales hit a post-recession record last year, according to a Cox Automotive market report, with an estimated 39.6 million sold. Though demand remains strong, industry analysts expect used-vehicle values to remain strong in 2019. So it’s not surprising that just up the interstate from Carlotz, another business, EchoPark Automotive, is carving out its own niche in the pre-owned car sales arena.

When EchoPark opens in late April, on Loop 1604 near amusement centers Topgolf and iFly Indoor Skydiving, it will offer pre-owned cars that are 1 to 4 years old.

The idea is to offer buyers a way to avoid the depreciation costs of buying a new car. EchoPark markets almost-new cars with low mileage at 20 percent to 40 percent below NADA (National Automobile Dealers Association) retail. “Plus, we do a 190-inspection. Guests come in and look at a car and they think it’s a new vehicle because it’s in such great condition,” said Mike Bell, general manager for the San Antonio market.

The buying experience is also different than a traditional dealership, he added. The “showroom” features no gleaming sports cars, but iPads for online shopping. Out on the lot, or in the garage, for-sale cars don’t have price stickers. Instead, there are tags that can be electronically updated as price valuations go up or down over time. There are no commissioned salespeople, either.

“We guide them to a car, with no pressure,” Bell said. “We’re very transparent, and so far, reception for the brand and the business model has been very positive.”

At its other two locations here, one in New Braunfels and another on State Highway 151, EchoPark sells pre-owned cars that are less than 8 years old and have up to 80,000 miles on them. Those stores are considered “outlets,” Bell said.

Results from a study by Cox Automotive published last year found that while 83 percent of consumers want to do one or more steps of their auto purchase online, when it’s time to buy, they turn to a local dealership, with seven in 10 saying they would never purchase a car without physically seeing it first. Eighty-nine percent still want to sign final paperwork at the dealership.

Carvana played into that consumer behavior trend when it was founded in 2010. The Phoenix-based company built its fourth location a stone’s throw from where EchoPark is located, near the Loop 1604 and I-10 West interchange. The eight-story glass tower “vending machine” with cars visible inside opened in March 2017.

Carvana is located at 5435 N. Loop 1604 E.

Bonnie Arbittier / Rivard Report

Carvana is located at 5435 N. Loop 1604 E.

A Carvana spokesperson declined the Rivard Report’s request for a demo of the vending machine or tour of the facility. But, according to its website, Carvana is an e-commerce platform for used car sales. There’s no physical car lot. The tower is simply where a buyer picks up a car once it is purchased.

Cars purchased from the company’s website are loaded into the tower in advance of a buyer’s pick-up date. Upon arriving at the car vending machine, customers drop an oversized Carvana coin into a coin slot, activating the vending process. The car is retrieved from the tower and robotically moved into the delivery bay on an automated track where the buyer can then drive it off the lot.

It’s an experience designed to be memorable and fun. Yet just beyond the Carvana tower sits the kind of driving fun that doesn’t involve MSRPs, gap insurance, and sticker shock.

As if to drive home its place as the city’s mecca of car dealerships, the area also boasts the indoor theme park Andretti Indoor Karting & Games, named after racing great Mario Andretti, which opened last fall.

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