Online Auto Sales Gaining Momentum

Data from two new studies shows that auto dealers and consumers alike are increasingly turning to the Web to purchase new cars.

According to venerable marketing information firm J.D. Power and Associates, twice as many car dealers are using online car buying services as last year.

At the same time, Greenfield Online reports that 68 percent of would-be car purchasers shopped online within the past year. Of the 2,000 consumers surveyed, 88 percent said that they did compare prices online. While the study showed that only one percent actually made a purchase online, that statistic will likely change as online automobile sites become actual transaction services, rather than lead generators referring consumers to their local dealers.

Consumer Benefits

“Although the system isn’t perfect, online services have improved to the point where it pays for every car shopper to at least try using one of these services,” said Chris Denove, senior director of the retail and distribution practice at J.D. Power and Associates.

“The online services are particularly effective for shoppers who feel intimidated by salespeople and want to find a dealer willing to give them their best price right up front without a lot of negotiation.”

Significantly, car buyers who use an online buying service save an average of $490 (US$) more on their new vehicle transactions than traditional showroom shoppers. Further, potential buyers who simply mention to a dealer that they checked the Web will often get a discounted quote, according to the study by J.D. Power.

Dealers Try To Keep Pace

Dealers are doing their best to adapt to multiple systems of marketing their products.

“If there’s a downside of all this Internet activity it’s that some dealers are so flooded with leads that they are struggling to keep up with the traffic,” Denove said. “As a result, some customers get lost in the shuffle and don’t receive the level of personal service they expect.”

The net result is that dealers are able to close only 12 percent of their new vehicle Internet leads, down from 15 percent in 1999. That factor could be the undoing of online car buying, at least from the consumer’s perspective.

A number of studies after last year’s holiday season indicated that consumers’ top complaint about Internet shopping was poor service and a lack of personal attention. If the online auto industry does not correct that trend, its growth could be stunted before it has a chance to take off.

At least the dealers know where they want to surf. The dealer satisfaction index from J.D. Power put Autobytel on top for the third straight year. Autobytel.com dealers receive an average of 84 new car sales leads per month — significantly more than any of its competitors. For the second straight year, Microsoft CarPoint ranked second, with Autoweb.com ranking third for dealer satisfaction.

Priceline to Span U.S. Market

Meanwhile, name-your-own-price Web site Priceline.com announced Thursday that it will expand its new car buying service across the 48 contiguous U.S. states.

Priceline is the first actual online transaction service for car sales to span the United States. Other online services are primarily research-oriented or lead generators, according to Maryann Keller, president of Priceline’s automotive services group.