The Internet has changed many shopping experiences drastically but there are few that have been impacted as strongly as car buying.

After all, many items – from clothing to house wares to toys – have been sold from mail order catalogues for many years. And although the Internet has added more features to this shopping experience, it hasn’t really uncovered any previously unavailable aspects of the ‘mail order’ buying process or provided you with radically more information than you had previously.

But online car shopping is very different than the offline process. First of all you can now find information about virtually any car instantly. You can learn about a car’s fuel economy, safety ratings, options, color choices and even consumer ratings at no cost, 24/7 without ever leaving the comfort of your home (although you may have to pay for certain information, such as that from Consumer Ratings).

Secondly you can find out what’s hot and what’s not, giving you bargaining power and helping you understand whether your desired car is going to be easy to find and priced lower than MSRP or difficult to obtain and significantly more than MSRP.

You can also find out via online forums and buying sites what the going price is for a vehicle. You never again have to wonder if you’re getting a ‘good price’ or being taken for a ride. And you can also find a ballpark figure for the value of your used car so that you don’t get ripped off when you trade it in. You can also ensure that you know about incentive, rebate and holdbacks (although the

last one can be difficult to find reliable information about) available on your car of choice.

Will you ever know as much as the dealer – especially about holdbacks, recently introduced incentive programs and other ‘behind the scenes’ costs? No. But the Internet will allow you to bargain from a much stronger position than consumers had previously. You can walk on to a

dealer’s lot armed with information that simply wasn’t available to the consumer of ten years ago.

So who’s buying online? Of the approximately 17 million new vehicles sold in 2001 only about 6% were bought online (versus 4.7% in 2000) and this percentage seems to be holding steady (not rising dramatically to the 20% as predicted by Gomez Advisors in this 1999 article). It’s hard to find out exactly who these buyers are without paying big bucks for the closely guarded information (for example, J.D. Powers Automotive Shopper report costs $15,000 US). However, several news items suggest that the majority of online car researchers and buyers are relatively affluent, younger and

that the higher the price tag on the car the more likely that the buyer will have researched it online.

Whether the car is actually bought online or not, researching cars online has become nearly
universal with 64% researching new car purchases online in 2003 (versus 54% in 2000 and 40% in
1999). Interestingly third party sites such as Kelley Blue Book and Edmunds score highest in terms
of usefulness and user-friendliness over manufacturer sites.

So who is selling cars online? Unfortunately (for consumers but not for dealers) the legal system in
the United States means that no matter how you buy a car it is actually coming from a dealer’s lot. And unless you have the car delivered, you will have to set foot on that lot to get your vehicle. It is presently against the law for manufacturers to sell cars directly to consumers and naysayers say that
it will never happen – that manufacturers are simply too big and complex to ever be able to custom produce cars to order for millions of consumers.

Many dealerships are participating in both direct selling and third party buying sites. For example, if you wish to buy a new Chrysler PT Cruiser you can go to CarsDirect or Autobytel to buy it or
simply go directly to the Chrysler site. All three sites will allow you to configure the vehicle as you wish (but to varying degrees – the Chrysler site will, not surprisingly, offer you the best ability to customize your vehicle). The CarsDirect site may supply an upfront price (depending on which state you live in) while the Autobytel and Chrysler sites will return a quote on your configured car via e- mail or telephone.

At this time there is no mechanism to allow you to configure, order and purchase your desired car directly from a manufacturer without dealer involvement. Will that ever happen? I don’t know. Certainly the large and politically powerful dealership lobby does not want to see this happen and industry pundit Art Spinella of CNW Marketing Research seems to think it’s unlikely it will ever occur. (Did you know that the National Automobile Dealer’s Association has over 19,700 member dealerships and that last year the top US dealership made $487 million in gross sales?)

Why do people want to buy cars online? There are lots of reasons — the first probably being convenience. It’s much more efficient to design your car online and see an upfront price or request a price quote than it is to drive all over town looking for a car that matches your requirements and
then stopping and asking for a price on it.

The second reason is eliminating hassle. Is there anyone – even including former car dealers – that doesn’t have a nightmarish tale of hassles encountered during a new car purchase? Demeaning, rude and aggressive techniques are legend in the car sales business and many people are happy to do whatever is necessary to avoid haggling over prices and being subjected to salesmen’s mind games.

The third reason is one that is only coming to light as more people use the Internet to buy cars. Internet car shoppers save money. A recent article on the Edmunds site had Internet shoppers paying the same as or less than traditional shoppers – and all without the hassle of in-person shopping.


 

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