Buying a car in the United States is harder than it should be these days, not only because of pandemic-driven shortages that have created a historically frenzied car market but due to outdated state requirements for “wet ink” signatures on vehicle titles and state franchise laws that prohibit direct-to-consumer sales from automakers. Even though the pandemic has moved many traditional in-person processes such as negotiating, financing, and vehicle customization online, consumers cannot easily purchase new cars online. State legislators should modernize these laws to streamline the car-buying process.
The first problem is that consumers in most states will eventually need to complete paperwork in person to buy a new car. According to an email from Lauren Bailey, director for franchising and state law at the National Auto Dealers Association (NADA), a trade organization representing automotive dealers, only “nine states allow an electronic signature on every single document” that would allow a purchase to take place remotely. Everywhere else, consumers must complete some portion of the paperwork with a handwritten, or “wet ink” signature, for the purchase, title, or vehicle registration to be accepted by the state motor vehicle department. But the “wet ink” requirements by state DMVs are outdated. Every state has a framework for electronic signing in place, there are no longer any federal requirements impending the transition to paperless transactions, and car dealerships have signaled their support for the transition by lobbying to reduce “wet ink” signature requirements.
States should allow electronic signatures on all necessary documentation for vehicle purchases. States like California, New Jersey, and Florida have all recently changed state practices, such as accepting e-signatures on titles, registration, and transaction documents, to improve the consumer’s car-buying experience. Cox Automotive, an automotive retail service provider and research firm, found that shoppers who completed more than half of their purchase journey online reported higher levels of purchase confidence and greater overall satisfaction, including time spent at the dealership, compared to those who completed fewer than 20 percent of the experience online. A paperless experience also improves purchase efficiency during the purchase, as paperwork completion accounts for nearly one-third of the total time spent in the dealership during a vehicle purchase.
The second problem is that state dealer franchise laws prohibit direct-to-consumer sales by automakers. In the past, selling vehicles through dealerships offered advantages to manufacturers who lacked a nationwide distribution network to reach consumers. In exchange, dealers received exclusive rights to sell in a certain territory. The Internet has made it feasible for manufacturers to sell directly to consumers—cutting out the middleman and reducing overall costs by reducing inventory overhead and delivering built-to-order vehicles—but state laws force automakers to instead sell through intermediaries. Some states are slowly modernizing regulations to allow automakers to engage in direct sales of EVs, but they should go further to allow direct sales from manufacturers of all new vehicles online.
The pandemic led dealerships to embrace technology in new and innovative ways, but outdated practices and regulations inhibit dealers, automakers, and consumers from engaging in truly end-to-end online shopping. States should modernize the car-buying process by updating and eliminating regulations that hold back online purchases of new vehicles. Doing so would make it easier to shop online, streamline the car-buying process, and reduce costs for consumers.