Why
Buy a Car on the Internet?
Lots of people don't
realize that you can buy a car on the Internet. They
figure: How are they going to fit my new Honda into
that little FedEx truck? And how much is shipping and
handling for something that big, anyway?
We still live in a material world, and
we're all material girls or boys. But it is true that
you can research the vehicle online. You can then buy
it at a very, very good price.
You can use the Internet to do almost everything that
you used to have to do at a traditional dealership:
- Narrowing your choice of vehicle
- Deciding whether to buy or lease
- Arranging financing
- Finding the best insurance
- Figuring out what your trade-in is worth
In other words, you can do almost all
of the preparation for buying a vehicle while online.
After the price, the finances and all the other details
are essentially finalized, you can just waltz in, sign
a few papers, and drive off in your new vehicle. The
bad old days — when you had to spend hours getting
sales pitched, negotiated, and distracted by confusing
math at the dealership — are over.
Notice the process here: You use the Internet to get
price information as well as to arrange financing and,
if necessary, insurance. You then visit a local dealer
to first test drive and visit again to conclude the
process and actually purchase the car itself.
A smart shopper does all the preparation online. Go
to the dealer for only two things:
- To take a test drive to be sure you physically enjoy
the vehicle you've chosen
- To complete the final details: signing the necessary
forms, handing them the check for the full price (which
you've already obtained via online financing), and driving
away in your shiny new vehicle
REMEMBER
We use the term car in this book quite often, but we
also mean that term to include trucks, SUVs, and other
kinds of vehicles. Perhaps sticklers for proper diction
would want to use the word vehicle instead of car, but
the heck with them.
Avoiding the Dreaded
Haggling Process
Most people dislike buying a car because they hate to
negotiate. Use the Internet and you don't have to negotiate!
What's more, by avoiding the bargaining process, you're
likely to save yourself quite a lot of money. Most of
us are very bad at negotiating for a new car, and most
car salespeople are quite good at it.
Car haggling. You remember it, don't you?
You sit around for hours trying to save some money —
and you're dealing with professional negotiators who
know lots of ways to wheel and deal. Don't forget that
car salespeople are usually outgoing and personable
and enjoy working with people. They're often essentially
quite nice. But they have a job to do — a job to
do on you.
Buyer's remorse
Almost everyone drives off in their new car with the
nagging feeling that they could have saved quite a bit
of money if they'd been more shrewd, been in less of
a hurry, felt less sorry for the salesperson, or otherwise
negotiated better. They're right. They probably could
have saved hundreds, if not thousands, of dollars.
Car salespeople are often unfairly portrayed
as only slightly more wholesome and reliable than members
of Congress. Talk about defamation. Nonetheless, the
seller of vehicles is a direct descendant of the horse
trader.
In our culture, we have few opportunities
to practice bargaining. We live in a sticker price society,
and most of us don't attempt to whittle down the price
of a TV any more than we would bicker with the electric
company to get a lower power rate. We take a package
of light bulbs up to the checkout line and never think
to offer the clerk 25 cents less than the sales sticker
price.
Most of us are forced to bargain only
on the big-ticket prices. Because the cost of not bargaining
for the price of a house or car can be thousands of
dollars, most of us attempt to bargain for those items.
But we do a pretty poor job of it.
You walk into a dealership and the salespeople
begin immediately to "qualify" you, as they
call it. Innocent questions such as "What do you
do?" are far from innocent. They're figuring out
how to maximize the sale. If you seem stubborn about
getting the lowest price for the new car, they'll be
a bit stub-born, but yield if necessary. No problem;
they can probably make up that loss by jacking up the
cost of your financing and giving you a low-ball price
for your trade-in.
On the other hand, if you're one of those
people who has no idea what the dealer's cost is for
the car you're buying, but think that your trade-in
is worth a lot of cash, the salesperson can handle you,
too. If you focus on getting a high trade-in price,
they can slip in all kinds of unnecessary costs like
stripes, undercoating, "prep," upholstery
guarding, rustproofing, you name it. And they can also
hike the finance costs. Get it? They can raise whichever
of the four main costs of buying a new car you aren't
emphasizing in order to give you a "deal"
on what seems to pull your chain. The four main costs
are: trade-in, new car price, financing, and the "extras"
(undercoating and all the rest).
And this kind of manipulation is only
the tip of the selling strategy iceberg. You haven't
heard anything yet!
Getting a blank check
The greatest thing about buying your car online is that
you can avoid the negotiation phase of purchasing the
car. Before you set foot on the dealer's lot, you've
already researched the value of your trade-in and decided
the precise money you'll pay for the new car (and the
exact accessories you want), and you even have a blank
check in your pocket because you got the loan from an
online finance company.
Where'd this blank check come from? You
fill in a small form on the Internet, and the company
sends you an answer in minutes via e-mail. If you qualify
for the loan, the finance company sends you a blank
check — one of us got ours the next morning via
Air Express. The company tells you to fill in the check
for any amount up to a maximum (it allowed several thousand
more than we asked for). The check is blank because
you may want to add a CD changer or something at the
last minute. And the loan rates are usually excellent.
Jump In and Try Getting
a Price Fast
Do you like the idea of a nice, crisp blank check arriving
at your house tomorrow morning? Want to omit haggling
from your next car purchase? Then briefly visit a cyber
salesroom.
Throughout this section, you can find
descriptions of various popular and successful online
"showrooms" you can visit, with names like
cars.com, carsdirect.com,
autoweb.com, CarPoint,
and many others. To give you an idea of what virtual
salesland is like, go to carOrder (www.carorder.corn)
for a few minutes. To get there, follow these steps:
1. Fire up your browser
and type www.carorder.com into the Address text box.
(If you're using Netscape, type it into the Location
text box.)
2. Press the Enter key.
You arrive at the main entrance to carOrder's site.
Notice that this site offers several features
on its home page:
- Financing
- Research
- Leasing rates
- Insurance
- Order tracking
- A chat feature where you can interact
with a live person — so much more efficient than
the alternative
- Testimonials
- Saved specs (the "virtual garage")
- A 360-degree Exorcist-cam where you
can view the entire interior of the car you're interested
in
- Purchasing
- A toll-free number you can call, also
presumably featuring a live person
3. Scroll down
to the bottom of the home page (or press the PgDn key).
4. Click the Build It link.
You see the first specifications page, where you describe
your location and the make, model, and style of the
car you want. Choose whatever car you're interested
in.
5. Click the Configure
link.
You see the invoice price, the MSRP (manufacturer's
suggested retail price), and the price you can pay at
carOrder. You also see how much your monthly payment
would be for a purchase or a lease.
On this page, you can choose the interior
and exterior color schemes. You can also choose to save
this car to your "Virtual Garage" — that
way, everything you've done is stored so that you can
return to carOrder in the future and resume where you
left off. You don't have to retype or reselect options
when you visit the site again.
6. Click the Pick
My Options link.
On this page you can register yourself if you want.
If you choose to register, you'll go through several
pages, then resume with Step 7 when you've finished
the registration process.
7. Click the Continue
button.
You're asked to fill in contact information (name, password,
e-mail address, and ZIP code). The ZIP code is used
to figure out local taxes and fees like vehicle registration.
8. Fill in your
contact information and click Create my Account.
A new page pops up asking you to specify your city
and county.
9. Choose your
location and then click the Save these changes link.
You're sent an e-mail message confirming your account.
You also see the page where options are listed, taxes
and any rebates are described, and the cost of such
things as the destination charge or title certificate
is disclosed.
You're now registered, and you can return
to the site any time you want and pick up where you
left off. The car prices quoted are guaranteed for a
week, but you can always return to the "garage"
or "showroom" and change your specs or start
a new purchase.
Congratulations; you've just cybershopped
for a new car! In a matter of minutes, you can receive
a price quote. Try doing that in the real world of dealerships
made from brick and mortar. Nothing against salespeople
— many of them are personable, outgoing, even charming.
But they do have a job to do, and it generally doesn't
involve giving you a final price quickly or offering
a particularly low price, either.
What's Down the Line
Online?
One of the best things about buying and selling things
on the Internet is that you can eliminate the middleman
(and the money the middleman adds to th cost).
This can mean that: a factory outlet is
actually the factory (not some mall that calls itself
a factory outlet); that a warehouse sale actually sells
stuff from a warehouse; and that "wholesale direct"
is just what it says.
When buying a new car on the Internet,
the middleman you eliminate is the car dealership.
Local dealers providing online
quotes
Of course, there's a big difference between buying a
book or shirt online and buying a truck. For one thing,
the truck can't be sent by overnight FedEx.
However, the problem of distribution is being solved
in several ways. Most online car-purchasing services
function as dealer-referral services. You describe your
wants on the Internet, and then one (or several) local
dealers make offers — either sending you e-mail
with price quotes or getting in touch with you over
the phone.
The important differences between this approach and
the traditional car purchase process are that you get
price offers without having to drive around to visit
different dealers and you don't have to haggle.
Dot-com distribution
down the road?
Another tactic that may have a big impact in the near
future is the possibility that dot-corn car-selling
sites may create their own network of dealerships around
the country. Several online organizations are currently
reported to be contacting automobile manufacturers requesting
approval of dealership acquisitions. The owners of some
dealerships have apparently already agreed to sell to
Internet companies. Online companies face few problems
raising financing — many dot-com companies are
awash with cash. We wouldn't have imagined that AOL
could buy Time-Warner!
Clearly, this trend toward online companies'
ownership of local dealerships, if it develops, would
shake the long-established auto sales industry to its
foundations. However, the Internet has a way of reshaping
almost every commercial venture — from travel agencies
to booksellers. Only a couple of years ago, many people
were regretting the trend where local bookstores were
being put out of business by mega-stores such as Borders
and Books-a-Million. Now the mega-stores tremble as
online book sales increasingly eat into their bottom
line. Where, oh where, will it all end?
As a result of the empowerment we customers
are now getting from information we can gather on the
Internet, many car dealership owners have, as the English
put it, their pants in a twist.
Naturally, classic dealerships often seriously
resent the intrusion of the Internet into their tried-and-true
sales systems. Buyers walking into a car showroom knowing
what the dealer paid or, worse, already having received
a firm price have removed one of the important points
of negotiation that traditionally favored the dealer.
In the past, salespeople could use the price of the
new car as a useful selling point. Increasingly, though,
the selling price is no longer a variable that can be
fiddled with during the sale.
Now the very ownership of car showrooms
is perhaps in doubt. Manufacturers can refuse to award
a dealership for reasons ranging from inexperience selling
autos to inadequate financial backing. Manufacturers
have always had broad discretion in the awarding of
dealerships.
Why resist reality?
As someone wise once said, it's impractical to resist
reality. And all signs point to the Internet as the
wave of the future. If one or more online car-selling
sites manages to set up a dealership network, you could
arrange your financing, the car price, and every other
element of the car purchase entirely online. If you're
like most people, you would prefer not to have to undergo
the tedium and strain of the sales struggle at the dealership.
The car dealership of the future may well
resemble a simple warehouse rather than the glass-and-gloss
showrooms of today. Here are the steps that direct online
dealers can take to drive down the cost of a new car:
- Eliminate salespeople and their commissions
- Drop newspaper advertising (it costs
around $300 per car!)
- Set up a warehouse in a low-cost rural
area
- Avoid having to build a fancy showroom
- Stock cars on an as-needed basis (a
car sitting on a dealer's lot runs up around $300 per
car in finance payments before it's sold, on average)
All these moves cut the cost of a car.
Choose a car online and it's driven to your door from
that low-rent country warehouse sitting out there between
your town and the next town. Of course, this system
of cybersales does leave out the important test drive,
where you see if you are actually comfortable in the
real-world vehicle. But there are ways around this limitation:
perhaps a trial period to see if you feel right or a
simple trip down to the local traditional dealership
to kick the tires and take a test drive around town.
