Information superhighway may
be the road to a better car deal
Third in a five-part series: Online finance
By Lucy Lazarony • Bankrate.com

In the confusing and costly world of automotive shopping and financing, consumers have a new weapon at their disposal: the Internet.

Tons of automotive information sites can be found. They cover everything from how to find that dream car and haggle a fair price to the finer points of auto financing by loan or lease.

Plenty of sites are hoping people will buy a car through them and a small-but-growing number of financial institutions and Internet startups are offering online auto financing.

Online and timely
"The Internet aggregates all this information that most consumers would never have access to," says Michael Kranitz, founder of LeaseSource.com. "Clearly, it's a tool that ought to be used before they go out and shop."

One of the great advantages of using the Internet for research is the timeliness of the information, especially in the area of pricing.

"The books are a few months behind by definition," Kranitz says. "And good sites update on a weekly basis."

Jack Nerad, former editor of Motor Trend and co-host of the radio show America on the Road, adds, "The Internet is great for finding dealer invoice prices and that type of thing. It's generally accurate. It's easy to do. So why not do it?"

CarWizard, Edmund's, Kelley Blue Book, Microsoft CarPoint and Autobytel.com are among the sites offering pricing information.

Let the reader beware
It's a good idea to check out who's behind the site. Is it an author hawking a book? A well-known industry expert? A consumer advocacy group? A site hoping you'll buy a car guide through them? Be sure to visit several sites and compare all information and advice.

The accuracy of information varies from site to site. "There's a lot of people who pretend to be automotive experts who aren't," Nerad says.

And while online, be sure to compare loan rate information from banks, credit unions and finance companies from across the country for the best deal available.

"It's helpful because the best rate may not come from a local bank," said Chris Musto, senior analyst at Gomez Advisers. "In fact, it probably won't."

Banks joining the rush
Many financial institutions, such as Huntington National Bank, have added auto-financing information to their sites as well. Not only can Web surfers find out about Huntington's loan and lease programs, but they can study a glossary of financing terms and try out the site's calculators.

The Chase Web site describes how easy it is to apply for an auto loan -- a short application can be completed in 15 minutes and an approval process in less than two hours -- but people must call a toll-free number to get more information. Bank of America's Web site boasts an online application for auto loans, but it's only available to California residents.

A small number of banks, credit unions and finance companies offer loans online. PeopleFirst Finance targets customers with excellent credit. NationsBank offers new and used auto loans through CarFinance.com to people who buy cars through a franchised dealer.

GiggoCar, a company of DaimlerChrysler financial services, launched its Web site in January. Like CarFinance.com, online new and used car loans are available for people shopping at any franchised auto dealer.

Lenders like these are hoping to woo customers with a hassle-free loan process and loan rates that are often 7 percent to 8 percent for new and used car loans. The national average for a 36-month used-car loan is 9.41 percent, 8.32 percent for 48-month new-car loans, according to analysis by Bankrate.com .

Quick response to online applications
It takes just five minutes to fill out most online applications. And some lenders respond to completed applications in 15 minutes. Others take an hour or a day. Checks can often be delivered the day following approval.

Experts point out that walking into a dealership with a check in hand can take some of the stress out of purchasing a car.

"Because the financing is in place, your negotiating position is strengthened," says Robert Ferber, president of NationsBank's Electronic Vehicle Remarketing Inc., which runs CarFinance.com. "You just hand the dealer the check and you drive away in the car."

The Internet is also a great source of leasing information. While auto loans are fairly straightforward, a lease is another matter. Many people sign up for leases without understanding the terminology or how the different pieces work together. Such ignorance can be costly.

"Out of all the information on the Internet, the accurate advice on leasing is perhaps the most valuable, because that's where consumers lose the most money when they lack education," says Kranitz of LeaseSource.com and author of Look Before You Lease: Secrets to Smart Vehicle Leasing.

A consumer brochure on leasing is available from the Federal Reserve Board. The Florida Attorney General's Office also offers leasing tips.

No instant knowledge
While experts agree that the Internet is an excellent source of auto information and advice, some worry that people may think they are "auto experts" after just a few minutes of surfing.

"People are lulled into a false sense of knowledge superiority," says Mark Eskeldson, author of the book What Car Dealers Don't Want You to Know. He also runs the Web site CarInfo.com,  which provides consumers with information on how to buy a car.

"Yeah, it's possible people can get all the information they need on the Internet, but you have to read hundreds and hundreds of pages."

But others point out that even 30 minutes spent checking pricing information can be worthwhile. "It depends on how into it you want to get," Nerad says. "Half an hour is better than nothing."

It all boils down to a person's comfort level when it comes to auto shopping and financing. Kranitz says, "Do what it takes. You'll know when you know enough."

-- Posted: March 3, 1999