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.
