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Casting the Net for a new car

photo
Loren LaSure used his computer to research cars before making a decision to buy. [Times photo: Jill Sagers]

With information, reviews and prices easily found on the Web, consumers can make more informed car-buying decisions.

By G.G. RIGSBY

© St. Petersburg Times, published September 20, 1999


When the convertible top on his 1994 Cadillac Eldorado refused to go down no matter what button he pushed, Loren La Sure turned to his home computer and the Internet to shop for another car.

La Sure knew he wanted a convertible loaded with options, but he wasn't sure about the make or model, new or used. He turned to the Internet for car-shopping information.

Online car buying

• The percentage of people buying new vehicles from online buying services more than doubled in the past year, from 1.1 percent to 2.7 percent, and may go as high as 5 percent by next year.

• Online shoppers save an average of about $1,000 on their new-car deals.

• About 19 percent of car buyers pay full sticker price, but only 14 percent of online shoppers do.

- J.D. Power and Associates

Automotive web sites

He narrowed his choices to two new models from Ford and Chrysler, then went to dealerships for test drives and negotiations.

A St. Petersburg dealership thought it had won his business -- until La Sure received a last-minute e-mail from a Clearwater dealer that saved him $2,000. Sold: A 1999 "inferno red" Chrysler Sebring with a camel leather interior.

"It was a great experience," La Sure said. "I'd rather spend the time at a computer than sitting across from a salesman."

Welcome to the Internet car lot, where an increasing number of people are shopping. According to market research firm J.D. Power and Associates, 40 percent of people who recently bought new or used vehicles used the Internet to help them shop, up from 25 percent a year ago.

While more people are shopping for cars online, most consumers want to kick the tires before buying. Forrester Research predicts that consumers will buy 800,000 cars online by 2003 -- but another 8-million will be sold through information gathered on the Web.

Access to information on the Web has put the buyer in the driver's seat. Gone are the days when "you'd go in (to a dealership) and hold your breath and hope you didn't get taken," said David Cooperstein, a research director at Forrester.

The industry seems split on the idea of selling online. One-third of dealerships do not respond to bids submitted through online buying services, according to J.D. Power. Others, though, are calling the changes nothing short of revolutionary.

"Not since the beginning of automotive retailing has there been such vast changes in the way we do business," said Frank North, director of marketing for the Ferman chain of car dealerships, which has 12 locations along the west coast of Florida. "This is the first major revision" in the way cars are bought and sold.

La Sure says finding Web sites with information about cars was easy, even for a relative novice. He used search engines, such as Excite (http://www.excite.com) or Yahoo! (http://www.yahoo.com), typed in keywords such as "car" or "Ford" and was on his way.

He spent about eight hours over several weeks studying cars on the Internet. J.D. Power found that the average Internet shopper spends more than four hours researching and visits six automotive Web sites.

La Sure liked Microsoft's CarPoint, which lists dealer invoice prices, rebates, reviews, values of used cars, information on financing and insurance, and price quotes on new and used vehicles.

He had decided to buy a Chrysler Sebring from a St. Petersburg dealership, but then got an e-mail reply to a query he had made through the CarPoint site. The message was from Russ Carroll, the Web site coordinator for Dayton Andrews Chrysler Plymouth Jeep in Clearwater, offering him the same car for $2,000 less.

Carroll, whose Clearwater dealership sells about 20 cars a month because of the Internet, says he comes to the office at odd hours seven days a week and answers customers' queries as fast as he can.

Instead of the traditional method of going to a car dealership and bargaining down from the sticker price, consumers now have access to information that used to be a closely guarded secret -- the invoice price, or the amount the dealer paid for the car.

Consumers easily can find reviews of cars and information about rebates or special financing. They can visit manufacturers' Web sites, many of which give them the option of clicking on a photo of the car they want, then changing its color.

Some sites also offer 360-degree movies of the cars -- giving the potential purchaser the ability to do just about everything but kick the tires and take a test drive.

Car Web sites generally fall into four categories: those posted by automakers; those run by car-buying services; those posted by local dealerships; and those offered by Consumer Reports and Kelley Blue Book-like services for information and reviews.

Potential car buyers interested in a particular make of car can type in the name of the manufacturer in a search engine and quickly find the maker's site.

Car-buying services offer a wealth of information, including sticker and invoice prices, options, rebates, special financing and reviews. Many sites allow buyers to make side-by-side comparisons of different manufacturers' cars. The information is free to the consumer. Dealers who get leads on potential buyers pay for the service.

Local dealerships are best found through links from their factory's Web sites or through search engines. The Web addresses often follow common sense, such as http://www.fermanauto.com.

New cars aren't the only ones that take up Internet space. J.D. Power found that 26 percent of used-vehicle buyers check the Internet before purchasing, according to a survey of 10,000 consumers who bought 1994 through 1999 used vehicles.

Buyers who do some Web-based shopping can find information that can help them buy a car close to the invoice price, and perhaps even for less.

Even then, dealers are not giving up their profits. Dealers can make money because of rebates, incentives or "floor-plan assistance" from the factory, amounting to 3 to 4 percent of the car's sticker price.

Of course, the Web is a fountain of consumer misinformation, and auto sites are no exception. But savvy shoppers can use the data online to comparison shop and to track down information about factory rebates and other incentives, which dealers get for selling specific models. The dealer can keep that money -- or pass it on to a customer who knows enough to bring it up in bargaining.

Web sites also offer information about low-interest financing specials. And sometimes manufacturers offer coupons only over the Internet.

Last spring, Buick offered a coupon on the Internet for $500 off the price of a Regal. GM's Oldsmobile division offered a $50 gift certificate over the Internet to people who filled out a Web survey and took a test drive.

The access to information is "great news for the consumer," Forrester Research's Cooperstein said. "I think the manufacturers and dealers are scratching their heads and wondering, "What will we do?' "

Not all dealers like the new system. Some dread customers who may be armed with more information about the particular make and model they want than the salespeople on the showroom floor, Cooperstein said.

The dealers who are embracing the medium are designing their own Web pages, paying car-buying services such as Microsoft CarPoint or Autobytel.com for leads to potential buyers and following up on leads from their manufacturers' Web sites.

Ferman is using all three methods to find buyers. In July, 38 percent of the people who bought cars from Ferman dealerships said they checked the Internet before purchasing, North said.

Dealers make less profit on cars sold to people who consult the Internet, but they make money by increasing their volume, by selling to customers they likely wouldn't have met otherwise.

In the future, dealers may have to remake their business plans, selling more cars at lower profit and selling side products such as service contracts, financing and insurance.

"The person who ignores that (the Internet) probably won't be in business long," North said. "If you ignore it, it'll be kind of like you're selling typewriters."

Internet customers tend to be busy people who want information quickly and may pay a little more for less hassle. Some of the car-buying services offer to find a discounted, no-haggle price for almost any car. Their main benefit is convenience, not the lowest price.

But customers who are armed with information are more likely to pay less than those who wander in uneducated.

At AutoNationDirect.com, those who buy cars through a site that links 17 AutoNation dealerships in the Tampa Bay area may get a better price than customers who walk in the door without doing any Internet research, said Oscar Suris, an AutoNation spokesman.

Carroll at Dayton Andrews put it this way: "If they want to get it at invoice, they've got to go to the Web. I have to give them the lowest prices or I'm not going to sell."

-- Information from Times wires was used in this report.

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