When Amazon and Hyundai announced at the LA Auto Show that buyers would soon be able to purchase cars on the ubiquitous digital marketplace, you may have assumed they were simplifying that process into a one-click, all-online, fixed-price transaction—dealer nonsense be damned. In the long term, that may be true. The pilot program, however, is pretty far from realizing that dream.

CNBC explains in a new video that Amazon's current pilot program with Hyundai works in only a handful of states, is open only to Amazon employees, and—perhaps most importantly—still requires buyers to finalize the paperwork in-person at the dealership.

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Amazon's Car-Selling Aspirations

Hyundai first offered a "digital showroom" for buyers to learn about its vehicles on Amazon back in 2018. Then, at the LA Auto Show in 2023, the company said it'd be the first brand to sell cars through the digital retailer. 

As Jim Appleton, President of the New Jersey Coalition of Automotive Retailers, tells CNBC: "I'm really hard-pressed to understand how this is anything more than just a new lead-generator type program, no different than Autotrader or Cars.com that are well-known to consumers."

That's a sign of the many problems Amazon will face in delivering what consumers will expect of this service—not to mention getting dealer buy-in here. Buyers often cite speed, fixed pricing, and avoiding dodgy dealer tactics as key reasons why they want to buy online. Enabling that will require overcoming a lot of thorny issues.

First up: Amazon is not a licensed new-car dealership. That's a problem. State franchise laws often require new-car transactions to be processed by a dealer, and who can sell new cars is limited by franchise agreements with automakers that often have geographic restrictions. In a city with six Ford dealerships, I can't just set up shop and start ordering Fords directly from Dearborn at invoice.

So Amazon is partnering with Hyundai dealers to both provide the cars and legally execute the transaction. That means the entire model is dependent on the dealers, which may make it hard to disrupt the dealer model.

On top of that, many states require so-called "wet signatures" on new-car transactions. That means you can't digitally sign to complete the transaction, necessitating a visit to the dealer's finance office. As anyone who has bought a car can attest, that's where the real nonsense occurs, with add-ons, hidden fees, and upselling tactics common.

That sort of experience is not what Amazon wants in the long term. The goal, per CNBC, is to provide fixed-price transactions, completely online, with vehicle pick-up happening at special Amazon-branded sections of participating dealerships. That's all great in theory.

But dealers know consumers hate high-pressure sales, negotiating, and add-ons sold in the finance office. The reason they continue using these tactics is they're also the profit centers: Why sell a car at the best price if a customer isn't a good negotiator?

Now, it's far too early to write off Amazon's ambitions. As of now, the pilot program has solved none of the structural issues with selling cars online. But the company often makes big changes in between "pilot programs" and finalized offerings. While dealers may not want to give up on trapping us all in the finance office, if the only way to reach consumers is through fixed-price Amazon transactions then they may change their tune.

For now, though, if you want fixed pricing, freedom from high-pressure sales, and fewer booby traps in the finance department, you'll just have to go with a company like Tesla or Rivian, where online sales are baked into the model. Until then, we can probably expect future attempts at modernizing the dealer experience to be met with similar roadblocks. 

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