The biggest shift in the automobile industry over the past five years hasn't been the arrival of fuel-sipping hybrid gas-electric vehicles. It isn't even the tons of rebate cash and low-interest financing that often accompanies new-car offers.
It's the Internet.
In addition to providing consumers with mountains of information about all aspects of the car-buying experience, the Web has become a marketplace where buyers and dealers are reaching agreement on pricing and all but sealing the deal. By one industry estimate, 70 percent of all potential buyers use the Internet to research and shop for new vehicles.
Web sales are also growing in the used-car market. More used vehicles were sold via eBaymotors than at any single dealership in 2004. Sites such as Cars.com and AutoTrader offer hundreds of thousands of used vehicles online.
Aside from allowing busy consumers to check in with more dealers in a much shorter amount of time, Internet shopping appears to cut down much of the haggling factor -- the part of new-car shopping that people, especially women, say they hate the most.
Basically, online shoppers will encounter three types of sites:
Manufacturer sites: These are good places for general information about options, colors, rebates and manufacturer-linked financing deals. These sites will have suggested retail prices -- the number that you see on the car's window sticker -- and many have a search engine that will locate a dealer that has the car with the specific options you want. What manufacturer sites cannot do is tell you how much you can really buy that car for. They sell product to dealers and are prohibited by law and contract from enforcing any set prices or selling directly to consumers.
Third-party sites: These are sites such as Cars.com and Edmunds that provide editorial information -- reviews, news and tips -- and direct buyers to dealers that may have the vehicle they're looking for. When an e-mail inquiry from one of these sites -- or in the case of Cars.com, a call through the site's toll-free phone number -- arrives at the dealership, it identifies the buyer as someone who has already done the research and, one hopes, will be treated a little more respectfully than someone who just walked in off the street.
Dealer sites: These are sites set up by dealer groups or individual stores to capture Internet buyers. Some dealers link their sites to the fleet or Internet department, while others funnel all e-mails on a rotation basis to the salespeople on the showroom floor.
It's usually difficult or impossible to get a firm price quote on a specific vehicle on the first inquiry. Dealers jealously guard against handing out real deal numbers until they know the person they're working with is serious and isn't just fishing. But by the second or third exchange of e-mails, a buyer should expect to arrive at a firm quote.
Buyers familiar with doing a deal through online negotiations report that the first price offered by a dealer usually is within a couple of hundred dollars of a dealer's absolute best price, whereas someone who starts out on the showroom floor may have to negotiate down thousands of dollars from the manufacturer's suggested retail (factory sticker) price.
No-show in the showroom?By the way, it is possible to buy a car without ever setting foot in a dealership.
Most dealers can arrange financing through the Internet and will deliver the car to your home or office, although few buyers at this point go that route. There's the matter of trade-ins, where values cannot be set without a dealer first inspecting the car you're bringing to the deal.
Moreover, buying a car sight unseen goes against a consumer's instincts. The Internet can make the whole process easier, but at some point before they commit, most consumers want to see the car, drive it and see who's going to stand behind it after the deal is done.
Nonetheless, shopping on the Web is a great alternative to blowing several days trudging from one showroom to the next.
Using the Internet in the car buying process
|Search engine or portal||89%|
|At least one independent site||77%|
|Decision impacted by online research||79%|
Source: J.D. Power & Associates, 2005