Internet Automotive Market Has Room to Grow

Jul. 3–For a 10-year-old, the Internet automotive market is quite successful. But like most 10-year-olds, it still has a lot growing up to do.

A decade ago, eBay, Autobytel, Yahoo and Kelley Blue Book began to provide automotive information and listings online. Yet, the Internet hasn’t even come close to dominating car purchasing. Nor has it made the traditional dealership obsolete as some had predicted — and some, frankly, had hoped.

But the Internet has changed the way consumers research a car and, dealers say, has brought them a flood of new leads — 20 million prospective customers a year last year, by one estimate — who they might not have had otherwise, according to auto industry analysts.

More than half of car buyers use the Internet for research, but most close the deal the way it’s always been done: face to face at a dealership. A relative few venture deeper into cyberspace to solicit bids from multiple dealers via the Internet, to leave deposits online or to arrange financing.

According to Jupiter Research, only about half a percent of the 17 million new vehicle purchases in this country last year were made on the Internet. It predicted the percentage wouldn’t increase to much more than 1.5 percent by 2009.

“People are concerned about being hassled by the dealer” if they try to purchase a car online, said Jupiter’s lead auto analyst, Julie Ask, who’s based in the company’s San Francisco office. “They’re not sure if their information is going to be misused. And they prefer to be in control of the process.”

But Jupiter said one in five new car sales, about 3.5 million a year, are “Internet-generated” — that is, are researched online and lead to an Internet referral to a particular dealership. That number is expected to nearly double by the end of this decade.

The brief history of online car shopping matches that of the dot-coms: fueled by a lot of hype in the 1990s that proved in the new century to be overly optimistic. “It was a bit of a land grab early on, and everybody wanted to create a Web site,” said Jeremy Anwyl, president of Edmunds.com, a Web-based auto information service that offers pricing and product information and acts as a “third party” to refer prospective customers to dealers, who pay for each referral.

With trade-in, financing, insurance, options and extended warranty issues to complicate things, buying a new car can be uncomfortable for some in the impersonal world of the Internet, said Dennis Galbraith, senior director of auto marketing solutions for the research company J.D. Power and Associates of Westlake Village, Calif. “Live communication or video communication is more complete than voice or text,” he said. “When I can see your facial expression, I can have a greater confidence that we have an understanding and I know who I’m dealing with. The Internet has not taken away that obstacle yet.”

But use of the Internet for research has soared among car shoppers. In 1998, only about 25 percent of all new car buyers went online to gather information about cares and dealers, according to Power. By last year that number had risen to 64 percent for new-car buyers and 54 percent for used-car buyers.

So most dealers have set up Web sites where consumers can check inventory and in many cases make credit applications. Dealerships like Ramp Chevrolet and Hummer in Port Jefferson Station and St. James, respectively, and Paragon Honda/Acura in Woodside have separate sales staffs — nine people at Ramp, four at Paragon — to handle Internet-generated customers. “We get a large influx of leads each month through our Internet department,” said Ramp marketing director Barbara Gasparik. At Paragon, general manager Brian Benstock said his Internet operation, too, delivers a significant share of prospects. “It increases our capacity and velocity,” he said. “We can handle more transactions per hour.”

For automotive research, the amount of auto-related information available online on manufacturer, dealer, government, trade group and other Web sites, most of it free, is overwhelming, including wholesale vehicle and options prices, specifications, dealer and finance locators, crash-test ratings, reliability ratings and reviews and articles from magazines, on TV and in newspapers.

“I spent an hour or so a day for weeks kind of working through it,” said 50-year-old Michael Marks of Smithtown, the president of a Hauppauge energy consulting company who eventually settled in October on a new 2004 Nissan Murano, an SUV.

He and other buyers say their online research helped get them a better deal with less aggravation. “I don’t like going to different dealerships and playing that game,” Marks said. “I like using a local dealership, and if you know what you’re talking about, they’re pretty good.” In this case, the dealer was Smithtown Nissan.

But, as most buyers still do, Marks said he preferred to deal face to face with a salesman and e-mail any personal contact information. “I don’t want dealers call me, because I don’t know when they’re going to leave me alone,” he said. “They can be a little aggressive.”

Although many consumers describe buying a car as an unpleasant experience, there is often an emotional element to choosing a vehicle that can’t be duplicated online. Doreen Leo-Huneke, a 55-year-old social work pyschotherapist from East Islip, said she considered using a service like Autobytel that would link her with dealers interested in bidding for her business. But objectivity went out the window, she said, when she visited a Chrysler dealership in Bay Shore and fell in love with a PT Cruiser on the showroom floor. “It was a really, really spiffy model,” she said. “I said, ‘I gotta have that.’”

Others, though, don’t want to go near a dealership. For them, the operators of Web sites like CarsDirect.com will do the negotiating and even deliver the car to the customer’s home. About half of CarsDirect.com’s customers take it up on that offer, said spokeswoman Elke Martin. One was Devra Bressler, a 58-year-old retired elementary school teacher from Lake Ronkonkoma who had a new Toyota Camry driven right to her door. “It was very nice,” she said. “The guy who delivered the car put on the plates and showed me how to work the car.” Carsdirect.com doesn’t disclose specific numbers but said thousands of new and used cars are purchased each year through the site.

Many dealers also will deliver cars at the customer’s request.

The king of all sites for car buying, according to Jupiter, is also the king of all Internet commerce: eBay, which created its eBay Motors auction Web site in 2000, listing mostly used vehicles and parts. eBay Inc. won’t disclose specifics, but its claims of a vehicle sale a minute through its site would add up to more than half a million vehicles a year. It charges $40 to list a car and another $40 when it’s sold.

Most of the sales are by dealers, and most are across state lines, said Rob Chesney, eBay’s director of vehicles. To help protect buyers from fraud, the site makes available comments about the seller left by previous buyers. “It’s a simple but powerful self-policing marketplace,” Chesney said.

Other protections include arranging vehicle inspections for prospective buyers who want them and, in certain circumstances, reimbursing buyers victimized by misrepresentation by a seller.

Mike Curry, a 48-year-old Massapequa man who describes himself as a landlord and part-time carpenter, bought a used Honda motorcycle for $5,000 from a private owner in New Hampshire who listed it on eBay. “I looked at a couple of classified listings, but really eBay is the best,” he said. “Everybody puts everything on eBay.”

But 32-year-old New York City sanitation department worker Jagdesh Daneshwar of Richmond Hill said, “I wouldn’t buy a car on eBay. I like to look at the car and test-drive it.” He said he used the Internet in November to thoroughly research the minivan he was looking for, finally settling on a used Mercury Villager, purchased for $11,000 from a local dealer.

Not everyone, though, has been satisfied in attempts to buy vehicles online. Kenneth Pischel, a 39-year-old from East Northport who has made his living in commercial equipment leasing, said in an e-mail, “I’ve tried a few times, but the information you get is limited. … Also, the dealers are slow to respond to online requests.” He located the last car he bought, a Ford Mustang with the unusual combination of six-cylinder engine and stick shift, on his own in New Jersey.

For 54-year-old retired tax accountant Jack Hirsch of Levittown, the Internet armed him with details he said helped him get a good deal last month from Westbury Toyota on a new Camry. “You have to do your homework,” he said.

For dealers, the Internet has meant change — in some cases unwelcome. Some experts say Internet-generated customers tend to have done more research and are more serious about buying than the average tire-kicker. Power’s Galbraith said the Internet-savvy customer is more likely to be a more loyal customer when it’s time to buy the next vehicle. “They got the right car the first time, and they know it’s a good deal,” he said. “In previous years customers had no way of certifying that it was a good deal.”

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