Some say cryptocurrency payment option in auto retail is poised to grow

Carriage Auto Group has accepted cryptocurrency as a form of payment since 2015, but for years, few car and truck buyers used the digital method.

Then the coronavirus pandemic hit.

Since March 2020, the group, which has four stores in Georgia and two in Alabama representing the Nissan, Kia, Mitsubishi and Mazda brands, has averaged two transac-

tions a month handled entirely in cryptocurrency.

It may not seem like much, but Christopher Basha, the group's marketing and technology director, said it has cost nothing to offer, has reaped marketing dividends and essentially has become a low-maintenance revenue stream.

Carriage began accepting cryptocurrency for auto purchases after Basha got the idea from watching a roommate who was "mining" Bitcoin and Litecoin, which involves using sophisticated computer equipment to try to create additional currency.

He put up a notice on Carriage Nissan's website saying it would accept cryptocurrency. For about two years, there was no interest from customers.

Then, in 2017, things picked up when a customer at one of the group's Kia stores asked to pay in bitcoin. That customer referred some friends, and Carriage wound up selling about eight vehicles by accepting the digital money that year.

"So it was kind of just like — I don't know — I just threw some spaghetti on the wall to see if it'd stick," Basha said. "And it sort of did."

Now, even with cryptocurrency transactions merely trickling in, Carriage could be at the forefront of something poised to become more commonplace in auto retail, according to some experts.

Remember back in the 1990s, when the Internet was still relatively new and not everyone had an email address? That could be how cryptocurrency is viewed about a decade from now, said Stephen McKeon, associate professor of finance and a cryptocurrency expert at the University of Oregon.

That's not to say cryptocurrency doesn't have some immediate, practical uses. McKeon pointed to a lack of fees and chargebacks for retailers and the near-instantaneous nature of the transactions. There is also little, if any, potential for fraud.

For these reasons, McKeon said, "We think a lot of retailers are going to begin accepting cryptocurrency."

Still, among auto retailers, few are doing so, and the motivation for those accepting cryptocurrency seems to stem more from curiosity and marketing instinct than from practicality.

Amid media buzz about the digital money, West Mitsubishi in Orland, Calif., did a campaign this year to let people know it accepted cryptocurrency.

"We were jumping on the bandwagon with Dogecoin … as well as Bitcoin," said Sonny Baird, the store's general manager. "But we have not had anyone take advantage of it."

The effort has still paid off, he said. "It worked out well. We actually got a lot of free press off it," Baird said. The store continues to accept cryptocurrency and even advertises it on its marquee.

Accepting the form of payment has been easy to set up, thanks to a firm called Coinbase that handles conversions.

One challenge is the currency's volatility, Baird said.

During a 24-hour period ending Aug. 2, Bitcoin, for example, fluctuated between a low of $39,090.73 and a high of $41,507.63. That range was well below its value in March, when it topped $63,000, but still way above the $11,000 territory of August 2020.

Carriage's Basha said his group immediately converts cryptocurrencies into U.S. dollars using Coinbase, so it mostly steers clear of meaningful changes in value.

At one point, Carriage leaders discussed holding some cryptocurrency as a long-term investment but so far have decided against it.

"As a smaller, family-owned dealership group, it's a little bit harder to accept that risk for our employees," Basha said.

HGreg Group announced in March that its 32 used-only and franchised dealerships in the U.S. and Canada would accept cryptocurrency payments for new and used vehicles and that it would keep some of the digital money on hand.

"The HGreg Group is once again redefining the market by becoming one of the first automotive groups to accept cryptocurrency in its day-to-day operations," the retailer said in a release. "A portion of the revenue from sales made in cryptocurrency will be kept in this format by the company."

Group President John Hairabedian declined requests for an interview to discuss the cryptocurrency effort, but a spokesperson for the company last month confirmed that HGreg was still accepting it as a form of payment.

What about concerns around the digital nature of cryptocurrency? Could someone alter the code or perform some kind of hack to steal money?

Such a thing has never happened, said the University of Oregon's McKeon.

"And you can imagine, there is a massive incentive to hack it. It's half a trillion dollars of value sitting there," he said. "So it is probably the most robust piece of open-source software ever created."

The reason it's been hacker-proof so far is because the blockchain — the series of codes and ledger that underpin cryptocurrency — is replicated and decentralized across thousands of computer nodes that operate the software.

To alter the ledger, you'd have to get thousands of nodes to accept the new code and start running new software, "which they obviously don't if it's a piece of malicious software," McKeon said. It's proved to be so difficult to get all the nodes to accept changes that even beneficial upgrades to the software are almost impossible, he said.

McKeon said he believes cryptocurrencies are here to stay and will grow substantially. He also notes there is a lot more to the cryptocurrency economy than Bitcoin.

Indeed, the dealers Automotive News spoke to said they would accept any form of cryptocurrency — such as Dogecoin and Ethereum — as long as Coinbase would convert it. Some cryptocurrencies, known as "stablecoins," are pegged to government-backed currencies such as the U.S. dollar, making them far more stable than others.

Basha said he sees accepting cryptocurrency transactions as an additional revenue stream that costs nothing, as it grabs niche customers who also could refer friends.

"From a referral standpoint, it hasn't really cost us anything to pick up those extra sales," he said. "So, yeah, almost a no-brainer for me at this point."