• U.S.


7 minute read
John Greenwald

AFTER SIX MONTHS of hapless shopping for a new Chevrolet Suburban sport-utility vehicle, Phillip and Julia Maloney of Marietta, Georgia, were almost ready to give up. No matter how hard they haggled, they could never find a model with the features they wanted at a price they could afford. Then last January, Phillip, a postman and after-hours computer enthusiast, discovered a referral service called Auto-By-Tel on the Internet. He typed in what he was looking for at 11 one night and got a call from a dealer the next morning. “They talked price on the phone, and two days later, we picked up our Suburban,” says Julia, a writer and registered nurse. Cost: $28,000, which was $4,000 below the previous best price for the eight-seat behemoth. Adds Julia: “I’ll never buy a car any other way.”

Nor will other gratified owners who have joined the Maloneys in the vanguard of a revolution that is turning the once arduous task of buying or leasing a vehicle into a relative breeze. Browsing the Internet is just one of the new ways of kicking the tires that are giving consumers more bargaining power in a business famous for high-pressure salesmanship. Reason? Online shoppers can get information that dealers once kept to themselves–for instance, what the dealer paid for that beauty he wants to sell to you. Consumers are also riding the buying clout of warehouse clubs like Sam’s and PriceCostco, which now arrange sales and leases. In response, old-line dealers are creating auto superstores, where customers can choose from vast selections of new and used models tagged with no-haggle prices. “We have not seen anything like this in 75 years in the car industry,” says Donald Keithley, a partner in J.D. Power & Associates, which monitors car buyers’ satisfaction. “This is the first evidence that all hell is about to break loose.” Here is a guide to the new world of car shopping:

AUTOS ONLINE The Internet and private services such as America Online and CompuServe contain countless sites devoted to cars and trucks. But this profusion is easily divided into two main groups. One consists of hundreds, if not thousands, of pages on the World Wide Web, the multimedia portion of the Internet, that are loaded with facts and figures about every conceivable car or truck. Want to know how much a dealer pays for that 1996 Honda Accord you’ve been eyeing? Or what kind of gasoline mileage it gets? Just log onto Edmund Publications http:www.enews.com/magazines/edmunds) which gives the invoice price of an LX sedan with standard features and antilock brakes as $17,531, in contrast to/ a manufacturer’s suggested retail price of $19,840. The same listing notes that the midsize auto with automatic transmission gets a thrifty 23 m.p.g. in city driving and 31 m.p.g. on the open road.

The other Internet group consists of a handful of services and brokers, like Auto-By-Tel https://www.autobytel.com/ or AutoVantage (1-800-843-7777), on America Online and CompuServe, that bring consumers together with the cars of their choice. This combination of information and immediate access to models can turn shoppers into owners with just a few taps of the keyboard and a couple of telephone calls.

Auto-By-Tel, which is based in Corona del Mar, California, works through 1,300 dealers, who pay as much as $1,500 a month to join the network and agree in advance to charge a low fixed amount over a vehicle’s invoice price. That shaves profit margins but reduces the commissions that dealers pay salespeople and cuts down on advertising costs. Observes Auto-By-Tel founder Peter Ellis, who styles himself a reformed hard seller: “We simply say to our dealers, ‘Take that money you’re saving and take it off the price of your cars.'” AutoVantage, which charges its 2 million members a $49 annual fee, provides detailed car-buying information and negotiates with dealers on the members’ behalf.

But all this is merely the tip of the growing online world. For example, Dealernet https://www.dealernet.com/) developed by Martin Rood, a former dealer in Lynwood, Washington, offers 100 different Websites; they range from museums of classic autos to home pages for dealers who pay a one-time $14,000 fee to join up. Not to be outdone, General Motors launched a site last month https://www.gm.com/ that lets shoppers take the wheel of four virtual models and go for a virtual spin.

USED CARS, NOT CUSTOMERS “Car buying shouldn’t be any more trouble than buying groceries and should take no longer than a lunch hour,” says Richard Sharp, chairman of Circuit City, the giant electronics retailer that owns the CarMax chain of used-car superstores. CarMax, which has four outlets in three Southern states and plans to open three new stores this year, is the acknowledged leader of efforts to back up Sharp’s words. CarMax customers can leave their children in a supervised play area and use computer screens to scan as many as 1,000 vehicles on a lot. The company says its haggle-free prices are all below the book value set by the National Auto Dealers Association, which serves as the industry standard. Consumers then test-drive their choices and can arrange financing online in 20 minutes or less, either through a CarMax subsidiary or through North Carolina–based NationsBank.

This lunch-hour version of car shopping has been catching on fast. Nine of the largest U.S. auto dealers formed a chain of superstores called Driver’s Mart last month to woo back customers from outsiders like CarMax. In Madison, Wisconsin, dealer Jon Lancaster recently opened an outlet called CarAmerica, which he hopes will be the first in a chain of similar stores. “Fun, fun, fun,” is how Madison police officer Susan Carnell describes her 90-minute visit to CarAmerica. Carnell drove off in a 1994 Nissan Pathfinder truck, whose $19,950 price was more than $2,000 below the book value.

WELCOME TO THE CLUB Members of PriceCostco and Sam’s Club, a unit of Wal-Mart, pay annual fees for the right to get reduced prices on everything from stationery to a side of beef. Now, by enlisting networks of new-car dealers, these discounters are extending the concept to autos. The clubs refer members to dealers, who agree to sell vehicles at a fixed amount over cost. At Sam’s Club, where 32 million members pay up to $25 a year, Mildred and Dan Padberg of Tarpon Springs, Florida, figure they saved at least $1,000 on the $22,000 Buick LeSabre they bought last November. “It was an attractive price compared with what we would have received from our own bargaining,” says Dan, a retired economist.

DETROIT STRIKES BACK Chrysler has become the most aggressive U.S. automaker in putting these retailing ideas to work. The company angered many of its dealers by giving CarMax a franchise to sell new Chryslers, Plymouths and Jeep Eagles in Norcross, Georgia, beginning next month. Chrysler is also testing a new-car dealership called MidPark Jeep-Eagle in Dallas, where the fixed-price vehicles carry discounts of $1,800 to $2,000 below the manufacturer’s suggested retail price. “People appreciate a low-pressure place that offers a fair price,” says MidPark co-owner Jim DeWolfe. That spreading realization could soon turn the car dealer as shark into an endangered species.

–Reported by Jordan Bonfante/Los Angeles, William A. McWhirter/Detroit, Stacy Perman/New York and Lisa H. Towle/Raleigh

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