If buying a new car gives you about as much pleasure as scheduling a root canal, take heart. Computer technology, modern merchandising, and old-fashioned entrepreneurial spirit are about to put traditional car dealers on the endangered species list.
Let's say you're thinking of buying a car. You can visit a half-dozen dealers, kick tires, and dicker with the salespeople. Or you can dial up the World Wide Web and make your purchase in peace. Say you want a Ford Explorer, the third most popular vehicle in the United States. You need to make three online connections, all free.
Start by calling DealerNet (http://www.dealernet.com), created by Reynolds & Reynolds, which provides computer services to dealers. You can see a picture of the Explorer and find out how it compares with competitors like the Jeep Grand Cherokee in such key areas as trunk space, fuel economy, and price.
Suppose you settle on a four-door, four-wheel-drive XLT model. Key over to the prices posted by Edmund Publications (http://www.edmund.com), a longtime compiler of such information. There you discover that while the base XLT has a sticker price of $25,710, the dealer pays only $23,225. You also learn a little-known fact: The XLT carries a 3 percent holdback--essentially a rebate for each Explorer that Ford pays to the dealer at the end of the year. This may help you in evaluating the price your dealer quotes.
When you're ready to order, type in http://www.autobytel.com/. There are several buying services on the Web, but Auto-By-Tel is free. A few days after you've placed your order, you'll get a call from a nearby dealer. He will charge you a fixed amount over the invoice and deliver the car. Now, wasn't that easy!
The experience of George Chin, 43, a technical services manager in upstate New York, is typical. Using the internet, he compared the specifications of various models and learned their retail and wholesale prices. Then he placed an electronic order for a Ford Explorer XLT with Auto-By-Tel, a computerized broker service. A few days later, he got a call from a nearby dealer, Bill Colb Ford, who filled the order for a fixed amount over the wholesale price and delivered the vehicle. Says Chin: "The whole experience was painless. There was no price haggling. No psychological pressure. No surprises."
Auto-By-Tel is the creation of former California Ford and Chrysler dealer Peter Ellis. When his idea for selling cars on QVC television didn't work out two years ago, he decided to retail them in cyberspace. Ellis took sites on established online services like CompuServe, as well as on the World Wide Web, to solicit orders from customers. He relays an order to one of 1,200 dealers, each of which pays Ellis between $200 and $1,500 a month for referrals. The margins on each sale are low (about $600), but so are the costs. By snagging their customer electronically, the dealers can cut their marketing expense from $400 a car to $30. In one month, over 12,000 potential car buyers logged on to Auto-By-Tel. Electronic shopping has the potential to add enormous value to the buying process and reduce costs to a minimum. Manufacturers should be able to get accurate and timely data about consumer preferences that will enable them to schedule parts deliveries and production runs more sensibly. Even better, cars can be sold without building showrooms.
Eventually a customer may be able to conduct an electronic auction, asking, say, all the Ford dealers in the Northeast to give him the price and availability of a particular Explorer--delivered to his driveway, of course--and seeing how much they will pay for his trade-in. Then he could dial up the factory where his car will be built, schedule it for the production queue, and get a date for its delivery.
Dealers won't become extinct, of course. But for a change, neither they nor the manufacturer will be in control of selling a car. With all these new ways to but, it will be the customer, finally, who's in the driver's seat.
Source: Adapted from Alex Taylor III, "How to Buy a Car on the Internet.. and Other New Ways to Make the Second Biggest Purchase of a Lifetime," Fortune, March 4, 1996, pp. 164-68.