SAN JOSE, CALIF. — SAN JOSE, Calif. -- Buying a new car is like hiring an electrician or plumber at home. It's a glorious feeling when the project is completed. But in the end, you feel like you've overpaid.
Car buying, in particular, has always felt like a blind negotiation. The salesman controls all the relevant information: what cars are in inventory; how much each package of options costs; and, of course, the true cost of the vehicle (not the sticker price, which is the obvious starting point for haggling). Even business people accustomed to negotiating with vendors find themselves at a disadvantage.
We have always left the car dealership, keys in hand, feeling shorn.
Internet car-buying sites change the equation, giving the consumer much-needed leverage in the bargaining process. It helped my husband and me narrow our vehicle choices, explore the cost of adding desired options (such as kid-friendly leather seats), and obtain a quote that helped us shave $4,000 off the sticker price of the Mazda Tribute we ultimately purchased.
We don't know if we got the cheapest possible price for the compact SUV. And plenty of other factors certainly influenced the purchase price -- including the popularity of the car and the looming end of this 2003 model year, which motivates dealerships to cut better deals to clear inventory.
But at least we feel good about the process -- which is a first.
Doing online homework
As it turns out, we're typical of the new breed of car buyer. Jupiter Research analyst Julie Ask said 57 percent of U.S. consumers use the Internet to research a vehicle purchase -- as they would with any purchase. For three-quarters of those consumers, the online research will help determine whether they'll buy a new or used car; how much they can afford to spend and even the make and model.
A small but growing number of consumers use the Internet to select a dealer, arrange financing and buy auto insurance, Ask said.
No one expects the Internet to replace the local car dealer. (In most states, it's illegal to buy a new car from anyone but a licensed franchise car dealer with a physical establishment.) Moreover, few people who research their car purchase online use that as their sole criteria, Ask said. Even fewer -- 0.4 percent -- actually culminate the deal online with a deposit.
"Consumers still rely on the dealer's expertise. Still want to test drive. It's not a substitute, it complements information they get from the dealership," Ask said.
That's how it worked for us.
My husband, Dan, began researching the purchase six months before the lease expired on our Ford Expedition. He consulted independent third-party sources -- Edmunds and Kelly Blue Book -- to read car reviews and check out market prices for our ZIP code.
Once Dan narrowed his options, went to online dealers to get price quotes.
It pays to advertise
Jonathan Gaw, an Internet commerce analyst with the tech research firm IDC in Mountain View, Calif., said most local dealerships have overcome their initial resistance to the Internet to recognize such sites as cost-effective ways to reach would-be buyers -- perhaps more so than traditional classified newspaper ads.
Portal sites like Yahoo.com use ad software developed by its acquisition target, Overture Services, to allow local car dealers to display certain ads when a computer user enters certain search terms -- say, Mazda Tribute.
"The individual dealers are doing a much better job than they did a few years ago at promoting their own Web sites," Gaw said. "They're doing a much better job putting their inventory online -- what they've got on their lot, what features. 'If you're interested in a car, e-mail us. We'll find the car for you.'"
Both the dealer and consumer stand to benefit.
"That's one of the things that the Internet has done for car buyers," Gaw said. "Before, you didn't necessarily know all the options you had. You would go to the dealer, get the brochure. It's kind of like what a spreadsheet did for accounting. What if I do this? How much is it going to cost? Oh yeah, that wasn't so bad. Let me try adding extra wheels. Try out those packages. Before it was a real pain."