The U.S. online used-car market, which is on the brink of explosive growth, could threaten the finance and insurance revenues of traditional brick-and-mortar car dealers, according to market intelligence and advisory firm IDC.
IDC estimates online used-car sales' share of all used-car sales will jump from under three percent in 1999 to almost 40 percent in 2004. But there's one potential roadblock, according to Jonathan Gaw, research manager for IDC's eAuto program.
"Because traditional car dealers make their largest profits from finance and insurance services, they may withhold inventory if online auto dealers threaten this part of their business," Gaw said.
The research analyst believes the solution may lie in online used-car dealers providing their own F&I services.
"For the online used-car buying market to reach its full potential, online used-car firms will need to work hard to provide an integrated system and a full range of vehicle-related services, including financing, insurance, and trade-in services," Gaw said.
If the online used-car market can steer around this obstacle, IDC believes its revenues will accelerate from less than $10 billion in 1999 to more than $164 billion in 2004.
"Used cars tend to be high-consideration products for consumers, and the Internet helps bring clarity to the process and transparency to the market, which would lend greater efficiency to both buyers and sellers," Gaw said.
IDC's new bulletin, "Online Used Car Sales Market Forecast and Analysis, 1999-2004" forecasts growth in the online used-car market and analyzes the factors driving the market.