Buy your next car online? You bet!

February 19, 2001

You'll save time and avoid hassle, and maybe pay less, as well.

 

Buy your next car online? You bet!

Jump to:Choose article section... Starting the search Finding the best deal Letting someone else do the work What manufacturer sites offer Tips for Internet car bidders What about leasing online?

You'll save time and avoid hassle, and maybe pay less, as well.

By Leslie Kane
Senior Editor

If you'd rather sit naked in a meat locker than lock horns with a car salesman, take heart.

Car-buying Web sites let you scrutinize photos, read reviews, and learn the factory invoice prices of vehicles for sale. You can get offers from competing dealers, hire an online service to find the best deal for you, and finance your purchase. In some cases, you can even have the car delivered to your home without ever visiting a showroom. No wonder more than half of all new-vehicle buyers now turn to the Internet for help, according to the latest statistics from J.D. Power and Associates, a research firm in Agoura Hills, CA.

You might even get a price break if you buy online. "Dealers know that the average online buyer is better educated about pricing than the average customer who comes into the showroom; and the online buyer can compare bids within seconds," says Cory Ellerbee, an Internet manager with Fairfield Toyota in Fairfield, CA. "The dealer is motivated to offer a low price through the Internet, particularly since a salesman doesn't have to spend much time on the interaction."

What's a "low" price? Naturally, that depends on the car and the dealerships involved. But Steve Witten, with J.D. Power and Associates, says the average consumer saves nearly $500 when buying a car online, compared with what he or she would pay without the Internet. "It's not necessarily that dealers offer lower prices online, but Internet users gather more information and make better bids," he says.

You can choose from several types of online car-sales businesses. With referral services, you submit your auto request and get price quotes from participating dealers. Direct buying services locate the car you want, get you a price, and handle the paperwork to complete the sale. Manufacturer/dealer sites typically link you to local dealerships, many of which give price quotes via e-mail.

Most car-shopping sites don't charge fees for their services. Shop around among the services, and get bids from several dealers. Some focus most on selling cars in quantity and will take less profit on each car; others emphasize maximizing the profit on each sale.

Most likely, you'll have to visit a showroom to seal the deal. But armed with an agreed-upon price, you should be able to avoid a sales pitch.

Not always, though. "When I used Autobytel.com (www.autobytel.com), the dealer acted almost as if I'd come off the street," says Douglas S. Ashinsky, an internist from Warren, NJ. "I had to start the whole haggling process from square one. Then he tried to push rust-proofing and other extras, so I said forget it, and went to a different dealer. I got a better price there than I found on Web sites."

So did Mark Spohr, a physician and health care information technology specialist from Tahoe City, CA. "None of the car-buying Web sites offered me a very good price," he says. Spohr bought a Land Rover Discovery II from a local dealer. "I paid $6,000 less than list," he says. "The best I could get from any of the Web services was $2,000 off."

Toyota's Ellerbee offers one possible reason: "Dealers pay a subscription fee of about $200 to $500 per customer to join the referral networks, and they have to recoup the cost in their price to you."

But whether or not buying online saves you significant money, clearly it can save you time and hassle. Read on for details about how to proceed.

Starting the search

Start by using the Internet to gather information that can help you construct a good deal. You'll find pricing data at the leading car resource sites (see below). You'll see the manufacturer's suggested retail price (MSRP), a marked-up figure with which dealers often begin negotiations. But you should base your target purchase price on the dealer invoice cost, which is theoretically what a dealer pays for the car. His actual figure is often lower, though, due to manufacturer incentives and holdbacks. A holdback is a percentage of the MSRP that the manufacturer pays the dealer to help defray the dealer's own financing costs.

Kelly Blue Book (www.kbb.com) makes it easy to peruse cars, select trim packages, and browse auto safety and rebate reports. The site is loaded with pricing information, reviews, and links to manufacturers and car-buying and referral services. If you don't know what car you want, type in your desired price range, style, and manufacturer. The site's Decision Guide will identify appropriate models.

Edmunds.com (www.edmunds.com ) shines with consumer advice, with articles like "10 steps that every car buyer should follow." At the site's message board, you can post questions and read about others' experiences with autos, financing, warranties, and insurance. The section on incentives, rebates, and leases lists manufacturer holdbacks and dealer cash incentives, although the information may be a few weeks old. Edmunds provides its own car-buying service—Edmunds.com PowerShopper—to help you get and compare offers.

MSN CarPoint (carpoint.msn.com) provides new-car reviews and a new-car buying service. You'll also find helpful advice about purchasing a new or used car, and you can check a car's recall history, which may help when you buy a used car.

Once you've gathered the information you need, it's time to log on to the Web sites of referral or direct-buying services.

Finding the best deal

Autobytel.com, MSN CarPoint, AutoVantage.com (www.autovantage.com), and AutoNation (www.autonation.com) are referral services that forward your car request to local dealers in their networks. You search an online inventory; when you've found the desired vehicle in your area, you submit an online purchase request. You're contacted via phone or e-mail with availability, pricing, and delivery information. The dealer allegedly offers his best price, although you can make a counteroffer. MSN Carpoint promises quotes within two days; AutoVantage.com boasts a turnaround within hours.

All four sites do searches for free. They also provide links to warranty information.

CarBargains (www.carbargains.com) charges consumers $165 to locate offers. "We have no ties to any dealer, and dealers don't pay us to bring customers their way," says Robert Ellis, director of operations at the Web site, in Washington, DC.

Tell CarBargains the model, make, and style you want, and it will get at least five dealers in your area to bid against one another on that vehicle. CarBargains claims its bids are lower than you'll get through other services because dealers know that since you've paid for CarBargains' service, you're savvy—not just a tire kicker.

Priceline.com (www.priceline.com ) uses the same buying process for cars as it does for airline tickets. Name the price you want to pay, and Priceline forwards it to subscribing dealers. If one matches your offer, you get a printout of the bid, which becomes the contract. If you then fail to at least visit the dealership, Priceline charges $100 to your credit card.

"To increase your chance of making an offer that's accepted, Priceline tells you the average purchase price for your car, because vehicles in demand sell closer to list, and others sell closer to dealer invoice," says the Web site's Brian Ek. The Acura TL, Honda Odyssey, and Honda Accord Sedan, were the three top models sold last month via Priceline.

Letting someone else do the work

Although referral services such as Priceline.com help you work with a dealer, direct-buying services handle the entire purchase process for you. "We find the car you want, take financial responsibility for it in the transfer from the dealership to you, and do the paperwork with you to complete the deal," says Chris Manzini, an account executive with CarsDirect.com (www.carsdirect.com). "You put down a $250 deposit for us to locate the car. We take care of the payments and signatures through fax and FedEx. You never have to communicate with a dealer.

"CarsDirect takes a profit from the dealer on each sale," adds Manzini. "We can usually get better prices than most consumers because we're experienced negotiators, have good relationships with the dealers, and bring so many customers through that they're willing to sell cars to us cheaper."

Greenlight.com (www.greenlight.com) and Driveoff.com (www.driveoff.com) operate similarly. Each makes a binding agreement online to purchase a car for you. You can arrange individually with some dealers to have the vehicle delivered to your home or office. If it's a commonly configured model that's in stock, the total time from getting bids to picking up the car can be as little as two days.

Still, you pay for the convenience, and with many services, there's no guarantee you're getting the best price.

What manufacturer sites offer

At sites operated by auto makers, you'll find plenty of information on the car you want, but don't expect objectivity. For that, you'll have to look to independent resource sites.

General Motors and Dodge have sites that simplify the quote-gathering process. GM BuyPower (www.gmbuypower.com) provides a car's MSRP, but not the dealer invoice price. Through the site, you can search current dealer inventory and contact the dealer via e-mail for a price. You can also register for a free site mailbox that lets you store offers and receive dealer mail. Dodge's site, Get Connected! (www.4adodge.com/get_connected/vehicles.html ), takes your car request, locates nearby dealers, and forwards their bids to you.

Tips for Internet car bidders

If you decide to purchase a car online, keep these tips in mind:

• Negotiate from the dealer invoice price, not the manufacturer's suggested retail price (MSRP). Check with Edmunds.com for current dealer holdbacks and incentives, which will give you an idea of how much leeway the dealer has.

• Don't be unrealistic and lose a good deal. "Some consumers subtract dealer rebates and holdbacks from the factory invoice, then offer $1,000 less," says Cory Ellerbee, Internet manager at Fairfield Toyota in Fairfield, CA. "What dealer wants to bother with a bid like that?"

For cars with MSRPs up to about $25,000, you can feel comfortable paying $300 to $700 over the dealer invoice cost. For cars with MSRPs of $25,000 to $40,000, aim for $500 to $900 over dealer invoice on cars at the lower end of that MSRP range, and $1,000 to $1,500 over on models at the higher end. With MSRPs of $40,000 to $60,000, shoot for $1,500 to $3,000 over dealer invoice price.

• Place your online bids and requests toward the end of the month. Dealers and sales managers have monthly quotas, and they may be more likely to offer a tempting deal near month-end, if they need to make their numbers.

• Don't forget that besides sales taxes, in some cases advertising costs as well as title and documentation fees are added to your agreed-upon price. Find out in advance what's not included in the quoted price.

• Consider selling your old car in a separate deal. With CarsDirect.com and Greenlight.com, a service adviser arranges for an inspection and appraisal with a local retailer, so you can apply your trade-in to a down payment. But some Web sites, such as Priceline.com, won't touch trade-ins, and others, including GM BuyPower, request trade-in information before giving you a new car price quote. That could work against you: Car negotiating experts warn against admitting you have a trade-in until you've locked in your new auto price.

What about leasing online?

If you want a new car every few years, have low annual mileage, and don't want to lay out much cash, you may prefer leasing. It's easy to find lease offerings online. Comparing them is tougher.

You can apply for a lease or link to a lease site from most of the car-buying and information resource Web sites. LeaseRite.com helps you decide whether to buy or lease, and explains closed and open-end leases, initial lease costs, and option rights. Specify the vehicle and lease term you want, and LeaseRite will find agreements for you to consider.

To determine the true cost of a lease, use the worksheet at www.wa.gov/ago/consumer/cars/wrksheet.html. This site, a service of the Attorney General of the Washington [State] Consumer Protection Division, gives leasing tips and helps you compare leasing and buying. Fill in the total cost of the vehicle (including fees, credit insurance, extended service contracts, and options you want), residual purchase payment, and other figures, and you'll see what each lease arrangement will cost over the life of the contract.

You can buy software that makes comparisons easier. For $24.95, you can download LeaseWizard (www.leasewizard.com), which analyzes and figures leases, loans, taxes, and lease-vs-buy options, and identifies hidden costs.

To bypass the onus of calculations, check LeaseWise (www.leasewise.com), which is affiliated with CarBargains. You provide the make, model, and style of your desired car, along with the lease term and yearly mileage you anticipate. LeaseWise checks its database of over 40 possible lease plans, determines which will produce the lowest monthly payment, and gets at least five dealers in your area to bid against one another to lease that car for that term and mileage. The cost is $290.

 

Leslie Kane. Buy your next car online? You bet!. Medical Economics 2001;4:103.