Used-vehicle dealers have a new question to answer as more buyers go online to find preowned wheels: Do you deliver?
Beepi Inc., a Silicon Valley company selling used vehicles on a mobile app or website, will launch a new service this week that delivers cars to buyers nearly anywhere in the U.S., regardless of where the vehicle currently resides.
The move follows somewhat similar services offered by rivals, including Vroom Inc. and CarMax Inc., KMX 1.28 % and highlights how expectations for more customized service are shaping a used market that could grow as new-car leases expire in coming years.
Customers wanting to retrieve a vehicle far away will need to be ready to pay extra. A Beepi spokeswoman says getting a car from New York to Dallas, for instance, will cost a buyer $ 899 in addition to the price for a car.
Vroom, a competitor, offers free nationwide delivery. CarMax, with a network of 161 stores, will move cars around the county to meet a customer’s needs.
Margins are typically much higher in the used market than for new-car sales, according to the National Automobile Dealers Association, prompting many traditional new-car dealers to expand used operations amid fierce competition.
Compared with the new-car market, where brick-and-mortar dealers abide by strict state franchise laws, the used business represents a virtual frontier for entrepreneurs looking to profit from strong automobile demand in the U.S. The new light-vehicle market is on track to hit about 17.5 million vehicles in 2016, and the preowned market is more than twice that size.
Transactions related to the 40 million used cars sold annually are dependent largely on geography. This benefits online advertisers and classified services, such as Autotrader.com or Cars.com, which can offer local listings for a price, but it limits the market for sellers.
Beepi went into business in 2014 with limited delivery services in markets where it has hubs. Certifying the used cars on its sites and putting a bow on them when dropping them off in a customer’s driveway, the company profits from a commission of between 9% and 10% on each sale.
Shoppers like Dayna and Jeff Deaton like the service because it doesn’t involve extensive interaction with a dealer. “There’s not a guy who dislikes car salesmen more than my husband,” Ms. Deaton, 53 years old, said Friday.
Within the past year, the Los Altos, Calif., couple bought two vehicles from Beepi: a 2015 Chevy Tahoe with leather interior for $ 50,000 and a burgundy 2014 Acura RDX crossover selling for $ 28,000. Thus far, Beepi has only done business in 16 markets, but as of Tuesday it will deliver from those 16 markets to 46 states, excluding Hawaii, Alaska, Montana and North Dakota.
Buyers outside the company’s market areas will have to register the cars themselves, according to a spokeswoman, but can still use the company’s 10-day and 1,000-mile money-back guarantee.
Going national “was the original vision of the company,” Alejandro Resnik, a Beepi co-founder, said in an interview. But Mr. Resnik said the company is seeing “a lot of demand that we’re not able to serve” in states that Beepi hadn’t delivered to before.
Beepi, a closely held company that doesn’t disclose sales or profit figures, said it has seen a 95% increase in demand this year through June, following a 10-fold spurt in 2015. San Francisco, Seattle and Los Angeles are top growth markets.
A recent deal with Ally Financial, ALLY -2.17 % an auto lender, to offer used-vehicle leases could drive further growth, the company said. Still, Beepi’s revenue is dwarfed by CarMax, which sells $ 15 billion in cars, services and financing annually.
The online used-car market has become increasingly congested. In addition to Vroom, companies such as Carloha Inc., Carvana and Shift Technologies Inc. are vying for market share with lower physical overhead costs than traditional dealerships, but with high marketing costs.
To build trust, these companies certify the cars they advertise. Dae Yu, a former BMW AG BMW -1.48 % master technician, developed a 240-point inspection for Beepi with the idea that he was validating the company’s car for a loved one.
“I want my parents to drive a nice car,” Mr. Yu said.
Because they usually are younger than seven years old, among other factors, cars on Beepi tend to sell at a higher price point. As of July 4, for instance, Beepi was selling cars at its online store such as a $ 8,000 Nissan Leaf and a $ 35,000 BMW 5-Series.
Beepi can’t meet all needs. The Deatons are considering buying a car for their daughter, who recently was in an accident, but Ms. Deaton said they’ll take her to a brick-and-mortar outfit for that. She said her daughter “doesn’t deserve a Beepi car yet.”
Write to Jonathan Bach at [email protected]