Used car dealers worried about car vending machines

Washington: If brick-and-mortar stores fear Amazon and e-commerce as a threat to their existence, used car dealers may be terrified by the newest development in their industry: a car vending machine. Yes, it's real. And no, you can't shake it to get a free one.

Online used car retailer Carvana opened its newest “vending machine” last week in Houston, where the gleaming, glass-encased structure sits right off a busy freeway.

The eight-storey automated garage — three levels higher than the first version which debuted in Nashville a year ago —holds 30 cars.

It dispenses used vehicles in four delivery bays, but only to customers who have the special coin to make it work -- which they receive after completing an online purchase. This is a marketing gimmick, of course.

But the company believes it could prove a valuable part of the strategy to win customers over by completely overhauling the dreaded process of buying a used car, something notoriously difficult and plagued by the fear of sales people taking advantage of prospective buyers.

“Our view of what we are trying to do is make the experience a high quality one that customers love,” Carvana co-founder and CEO Ernie Garcia told AFP. The goal, he said, is “to make car buying fun.”He said the founders did not start out planning to be an online site, but aimed to rethink the car buying transaction from start to finish and find ways to “differentiate economically, through the entire pipeline.”

The first step was to take a page out of Amazon's book and get rid of dealerships, which Garcia says adds $400 to the price of a car. Another $1,400 goes to pay sales personnel.

Carvana, which launched in 2013 and is now in 21 markets after adding 12 this year, stores its cars far outside cities in areas where rent is cheap. The company says this year it saved customers more than $1,400 on average on purchase prices compared to the Kelley Blue Book suggested price, the industry standard.

The typical concern for customers buying a used car is whether they can trust that the vehicle is safe and reliable, and whether they are paying too much.

And even in the best of cases, the process can take several hours of paperwork to complete a purchase through a traditional dealer.