Hitting The Web - purchasing a vehicle online

Kiplinger's Personal Finance Magazine, July, 2000 by Ed Henry

CARS | COMPUTER SHOPPING sounds like the ticket to a great deal. But don't bet your budget.

ONLINE CAR-BUYING services are among the hottest sites on the Internet, and as the model year winds down and dealers scramble to clear out leftover inventories, they're likely to heat up even more. When it comes to gathering information, the sites are undeniably a shopper's delight. But does buying a car on the Web beat burning shoe leather to search out a good deal?

Gloria Sequeira's experience proves that sometimes it does. About this time last year, the Mesquite, Tex., accountant set out to replace her five-year-old Honda Odyssey minivan. After shopping around, she found herself back at a Honda dealer, with her eyes on the redesigned, bigger Odyssey. "When you have two boys--one 7 and one 2--and you lug a lot of baseball equipment to all-star games, plus an ice chest and coolers, you need more space," says Sequeira.

But with demand for the new Odyssey intense, Dallas-area Honda dealers weren't dealing. Some were sticking with the sticker price; others were adding on to it. So Sequeira fired up her computer and found Autoinvoice.com, run by Mark Roberts Motors, in Tulsa, Okla. There she scored an Odyssey EX for $23,880, just $316 over the invoice price and $2,560 below the sticker price. There were two catches: She had to travel 250 miles to get the van--and wait until December to pick it up. "I was willing to wait six months to save $3,000," she says. "This is the only way to buy a car."

Unfortunately, not all Internet car-shopping sprees end successfully. Sakti Ghosh, a professor of computer science, was in a hurry to buy a C280 Mercedes-Benz sedan, and he wanted to buy from a dealer near his Silicon Valley home. His efforts on the Web proved futile: Most sites seemed more concerned with selling him financing than selling him a car. One site sent him to a dealer 150 miles away and didn't quote a price; another didn't deal in foreign cars. Autobytel, one of the leading sites, more or less told him to forget it--he wasn't going to find a deal on a Mercedes.

So Ghosh took to the streets and found a dealer who would sell him the car for about $500 less than its $39,210 sticker price. "I realized that e-commerce is not as straightforward as it seems," says Ghosh.

More hype than help. Although 40% of all new-car buyers report going to the Web as part of their shopping efforts, fewer than 3% actually buy on the Web. And for good reason: For now, at least, car-buying services promise more than they can deliver. You can't always get a quote from an online service, and when you do, it's often subject to change when you close the transaction on the dealer's turf.

"You get what you pay for," says Joe Sawyer, an analyst for Forrester Research, about the free sites. "And when you're not laying down any dough, the pricing isn't very reliable."

The allure of the Web is understandable. If you have little stomach for haggling, working on your computer in the privacy of your home might seem like a godsend. Do your homework and you may luck into a deal on a popular car--as Sequeira did. A good negotiator, however, will cut a better deal in person.

"Our studies show that people who bought a vehicle online actually paid 6.5% more than those who went into the dealership and haggled over the price," says Art Spinella, head of CNW Marketing, in Bandon, Ore. You can be sure of this: Finding a good deal on the Web is just as elusive as finding a bargain at a dealership.

Test-driving the Web. We visited some of the top dot-com car-buying sites, as rated by Gomez Associates, to check out the state of the Web. Our test: Find the best deal in the Chicago area for a Toyota Land Cruiser, a vehicle with a base sticker price of $52,208. (Kiplinger's target price for the Land Cruiser, based on a 4.5% markup over the dealer's cost, is $46,061.)

At Cars (www.cars.com), the price for the vehicle was $56,364; CarOrder (www.carorder.com), $50,451; Autobytel (www.autobytel.com), $49,801; InvoiceDealers (www.invoicedealers .com), $49,264; CarsDirect (www .carsdirect.com), $48,352; and DriveOff (www.driveoff.com), $47,467.

To be fair, the sky-high Cars price was probably for a vehicle loaded with options, rather than the base model we were after. But how would you know? The Web site didn't spell out the particulars, which means you can't tell if you're comparing apples to apples. And the prices? The sites include disclaimers that they're not set in stone.

Part of the problem is that car-buying services don't all work the same way. Of the 30 or so prominent services, some, such as Autobytel, Autoweb (www.autoweb.com) and CarPoint (carpoint.msn.com), are referral services that simply take your name and pass it on to a dealer.

"They put consumers in touch with dealers who pay for their leads," says Adam Weiner, an analyst with Gomez Associates. "You could do just as well--maybe even better--calling dealers out of the Yellow Pages and asking them for a quote," he believes.