Aug 14 2025
When Amazon steps into a market, change is inevitable — and the auto retail industry is now bracing for this exact seismic shift. Amazon has already disrupted the aftermarket auto parts industry and has also offered vehicle research tools, including vehicle detail pages and digital showrooms, for a number of years to support today's car buyers. Following consistent consumer requests for a “buy box,” Amazon recently decided to support the purchase of new vehicles on its Amazon Autos platform, according to Matt Nuffort, Director of Amazon Autos. However, Amazon Autos is still in beta with Hyundai as its sole OEM partner.
What exactly does this mean for the traditional dealership car-buying model? Purchases are still being made through the dealer, only much of the process is being completed on Amazon. While some vehicles can be purchased directly from Amazon’s website, other vehicle listings require a visit to the dealer's website. As for test drives and vehicle pickup, this can only be done at the physical dealership. Despite this basic primer on Amazon car buying, many unanswered questions remain. Here are a few of the big ones:
It’s a known fact that dealers make the majority of their profits from F&I, parts, and service. As a result of Amazon directly taking over some new vehicle purchases on its platform, dealers can expect a major hit to F&I sales from the outset. According to a Car Dealership Guy article, “the back-end—(think service contracts, GAP insurance, add-ons, etc.)—is vital and typically makes up around 50% of a dealer’s total profit. I’ve heard from several Hyundai dealers on Amazon Autos’ new car pilot program that back-end profits aren’t there yet.”
If dealers are going to list their best inventory on Amazon, they will need to figure out a way to capitalize on these back-end offerings. In an episode of the Car Dealership Guy podcast featuring Jeff Dyke, President of Sonic Automotive, and Matt Nuffort, Director of Amazon Autos, Dyke exhibited his confidence in the future of these offerings, stating, “We’ll solve it. I am not concerned about solving the problem of product penetration with the likes of having the power of Amazon, the power of our manufacturer partners, the power of the dealership network working on this topic.”
Many of the products Amazon sells can be fulfilled either directly by Amazon or by one of its third-party retailers. As mentioned, when buying a Hyundai on Amazon, local dealers are still providing the inventory and are very much involved in the sale. At some point, will Amazon cut out the middleman (dealers) and work directly with OEMs to obtain inventory and sell directly to the consumer? In the podcast referenced above, Nuffort made it clear that Amazon is not looking to replace dealers. “It’s creating a bridge for dealers to reach Amazon customers… in an environment that customers find very familiar.” Nuffort also states that without the dealer, they don’t have any inventory to sell, and that dealers are a critical element in servicing these vehicles as well. Based on these statements, it’s fair to draw conclusions that Amazon is not interested in working directly with the vehicle inventory from OEMs or servicing the vehicles they sell, at this point anyway.
Even if Amazon did decide it wanted to bypass dealers down the road, that may not even be an option. According to Jeff Dyke, “there are franchise laws in this world that will stop that anyway, so why go down that road and fight that fight?”
One of the greatest benefits of buying on Amazon is its amazing customer service and return policy. As a regular online shopper on many e-commerce platforms and a long-time Amazon Prime member, I believe Amazon offers the easiest way to return or exchange items within minutes using their app or website, along with a network of local Amazon return drop-off sites that handle the shipment for you. Returning a car is a different animal.
When dealing with new inventory, vehicles cannot be returned after pickup due to the precipitous ~10% drop in value the moment you drive it off the lot. However, orders can be cancelled at any time before pickup. The Amazon website also states that “if you are dissatisfied with your new car during or after pickup, Hyundai offers a 3 Day Worry-Free Exchange policy from participating dealerships.”
As Amazon Autos grows, they plan to expand their offerings to sell and lease used vehicles as well (referenced in the FAQs). According to the Car Dealership Guy, they are “kicking around the idea of a return policy for used cars when the platform eventually launches.” How they build out their return policy will be crucial to their relationship with dealers, and could significantly hurt dealership profit margins if not executed well. The Car Dealership Guy does a great job addressing this issue in non-negotiable #3 of the above-referenced article. “Say a car sells on day 1. It takes 2–3 days to pick up/deliver. Then, the (hypothetical) 7-day return clock starts. And if the buyer initiates a return on day 6? That car has been effectively “off-market” for nearly two weeks. And it might come back worse for wear.” The risk dealers face is “the depreciation that happens while the vehicle is stuck in ‘limbo’ and—more importantly—mounting floorplan expenses.” It’ll be interesting to see how Amazon tackles this major hurdle.
Vehicle trade-ins are a key component not only for consumers looking to knock some dollars off their new car purchase, but also help dealers replenish their highly sought-after used inventory (if the vehicle isn’t too old). As such, Amazon has partnered with ACV to support trade-ins on its platform. ACV values the vehicle trade-ins and the dealer is given the option to either take the vehicle at the value it's been given or decline, in which case ACV will take the trade-in (timestamp 16:50). This process helps eliminate friction by giving the car buyer one trade-in value that dealers cannot later devalue, thus making the transaction precise and complete so dealers can offer a great delivery experience.
At the end of the day, Amazon’s goal is to create a great customer experience, which is a large part of why they’ve entered the automotive digital retailing space, where customer experience has lacked for so many years. However, many dealers, including Sonic Automotive, see the value in a customer-first business and are excited to partner with Amazon to further nurture their customer relationships. The companies that survive this disruption will be those that embrace digital transformation, prioritize customer experience, and view Amazon not as a threat, but as an ally.
