New Cox Platform Gives Used-Car Buyers a Clearer Picture of Costs

Cox said it developed the platform with advice from Penske Automotive Group, which owns CarShop, a used-car seller that offers vehicles online and in its stores. Penske said it has started using Cox’s Esntial Commerce platform, which was introduced at the end of July. Cox plans to offer the platform to other used-car sellers later this year.

Penske, the system’s first user, declined to say how many shoppers have tried the platform. Last year, Penske’s CarShop sold about 53,000 vehicles and generated about $1 billion in revenue.

Penske previously used another e-commerce platform that allowed customers to complete a transaction online, according to Michael Kabcenell, vice president of retail strategy at Penske, which is based in Bloomfield Hills, Mich.

The older platform, which it declined to identify, gave customers a general idea of what they could afford, according to Penske, but it didn’t allow shoppers to see financing options for specific vehicles, and customers didn’t have a clear idea of what their payments would be until they received a final credit approval at the end of the sales process, according to Mr. Kabcenell.

“This capability, this AI, allows us…to bring financing up to the front of the process,” he said.

Cox isn’t the only company to apply advanced technology to the hot used-car market. Online car seller Carvana Co. said it is using AI and other forms of data analysis to offer customers near real-time trade-in assessments, financing options and pricing on extended service contracts, all of which can provide shoppers with a firm calculation of what their monthly loan payment would be on a specific vehicle. The technology is proprietary and only offered at Carvana, which had online revenue of $5.59 billion in 2020.

Cox is making its e-commerce platform available to a range of used-car companies. Many used-car dealers are laggards when it comes to technology implementations, said John Loehr, a managing director in the automotive and industrial practice at consulting firm AlixPartners LLP.

The goal “is really to enable the industry as a whole to transform,” said Kelly Mulroney, senior vice president of product and engineering at Cox Automotive.

Online sales platforms typically offer shoppers a loan preapproval that estimates how much money a buyer is able to borrow, according to Penske’s Mr. Kabcenell. Those estimates can be rough, because they typically don’t take into account a range of variables, such as whether the buyer wants an extended warranty, he said.

The Cox system allows car buyers to more precisely see what they would pay for a specific vehicle, by taking such variables into account, he said. The platform also allows a customer to get financing details on multiple vehicles at once, he said.

The platform can adjust financing terms on the fly as shoppers change preferences such as the amount of the down payment that they want to make, he said.

For example, a buyer who has good credit might propose a $1,000 down payment on a 2020 Nissan Leaf with a price tag of $28,796. In that scenario, the monthly payment on a 60-month loan would be $569, according to the system. If the buyer decides to make a $2,000 down payment, the system would recalculate the monthly payment as $551.

The system uses machine learning, a form of AI, to compare the profile of potential new buyers to those of people with similar credit profiles, who made similar purchases in the past, according to Cox. Based on that analysis, the platform presents new shoppers with financing options for the specific vehicles listed in their search results, Cox said.

Cox said the estimates are informed by market data from its Kelley Blue Book vehicle valuation service, its Dealertrack platform for dealers, and other Cox systems that provide historical dealer transaction and contract information.

“That aggregate data is what allows us to drive this automation,” said Cox’s Ms. Mulroney.

Write to John McCormick at [email protected]