Part One: Internet vs. Traditional Car Buying
How Much Can the Internet Save You?
There are two entrances into today's new car dealership.
The first entrance is the traditional one where customers walk onto the car lot, wait for a salesman to approach them, hear the sales pitch and then hash out a deal in a sales office.
The new entrance leads into the "virtual dealership." Shoppers can read car reviews, scope out photos and price their dream cars all on the Internet.
Which of these two paths to new car ownership result in a lower price for the consumer? And, which of these two approaches will be the most pleasant buying experience for shoppers?
This article has two parts. The first will gather the opinions of several Internet car salespeople and describe the Internet sales experience for shoppers. The second article will test these opinions in real-world shopping conditions. Taken together, they should give you, the consumer, the most up-to-date information about your best way to buy your new car.
The Creation of the Internet Department
Traditionally, dealers have sought to maximize their profit by keeping most of the figures in a deal hidden. In this way dealers charge customers whatever they can convince them to pay for a car. Because of the complexity of a transaction filled with many variables (trade-in value, interest rate, different loan terms, multiple fees) buyers often didn't even know how much they are really paying for the car.
But in the late 1990s, Web sites such as Edmunds.com began publishing the invoice prices of cars while also reaching a larger segment of the car-buying public. This neutralized the car salesman's most powerful weapon: confusion. A smart shopper could find the invoice price of the car he wanted to buy, add a 2-3 percent profit and make a take-it-or-leave-it cash offer. Car salesmen hated dealing with this type of buyer because their profit was lower.
But rather than lose this buyer all together, some dealerships began creating "Internet departments." With an Internet department, informed shoppers could bypass the traditional salespeople standing outside the dealership. (One Internet saleswoman called these salesmen "the vultures.") Instead, shoppers could contact Internet salespeople, either by phone or e-mail, and quickly get a bottom-line price. If the price was good, they bought the car. If it wasn't, they got another quote from another dealership. This reduced the haggling.
Even today, however, many people don't trust the Internet. They don't believe the car-buying process can be that easy.
Who is the Internet Saleperson?
The Internet salesperson might have once been a traditional car salesperson, but his computer skills and ability to correspond via e-mail, monitor Web sites and grasp the psychology of on-line buyers made them a natural for this position. In other cases, the Internet sales manager might also double as the dealership's fleet manager.
For an Internet department, it is more important to sell a lot of cars than it is to maximize profit on individual cars. Therefore, the initial price quotes from an Internet sales manager are often very close to the absolute lowest selling price for a given vehicle.
A Typical Internet Experience
Edmunds.com maintains a fleet of test cars, some of which we purchase ourselves. When shopping for a 2002 Nissan Altima, we searched for the exact car we wanted on the Internet. We located a car, with the options we wanted, at Lew Webb's Irvine Nissan and sent a request for a price quote to the dealership via e-mail.
A short time later, Internet Sales Manager Marj Aldoph wrote back, describing the options on the car and the color. She also wrote: "Your preferred Internet price is $27,417 plus tax and license." We compared the price to the Edmunds.com True Market Value® price and saw that her price quote was even lower. We bought the car at that price.
After the sale was finalized, we asked Aldoph if we could have gotten a better deal on a new car if we just walked onto the lot. "I would never walk onto a lot to buy a car," she replied. "I don't want to go through all the hassle." Besides that, she said, the sales team will start by trying to sell the car at sticker price. Plus, they will try to make more money on the back end, such as higher finance charges. "[In the Internet department] we are straightforward and disclose everything. Nothing is pushed onto a client."
Denise Justice, the Internet and client service manager for Rusnak Auto Group in Pasadena, Calif., said, "I like to be up-front with all my customers. I show them all the numbers. I don't try to hide things or put extras into the contract at the last minute. I don't want any misunderstandings."
When Rusnak wanted to develop its Internet department, it recruited Justice from Nordstrom because of that company's reputation for customer service. Now, Justice uses her skills to sell 15 to 20 cars a month (more than most car lot salespeople), often to customers who never physically come into the dealership.
"The Internet customer doesn't want the traditional sales pitch," she said. "They don't want to sit down and do the four-square [a worksheet used by salesmen for negotiating]. They won't play that game where the salesman starts high and goes low. They've already done their homework and, in some cases, they know more about the car than I do."
Justice said that women, in particular, prefer car shopping on-line because many Internet sales managers are women. "Women buy from me because I'm easy to talk to," she said. "I'm not like some men who won't give straight answers or may be intimidating."
However, the Internet can be a grind for those brave enough to work in this department. One Las Vegas Internet manager told us that he gets hundreds of e-mails a day, everyday. "They expect a reply almost instantly or you've lost their business. I spend a lot of time on-line, just going through my e-mail."
Justice said she works on salary with some commission. How much of what she makes is dependant on the scores on her "CSI" surveys (customer satisfaction index). "If I get dinged by even one person, for one point (getting a 4 out of 5 rather than a 5 out of 5) it can cost me $1,500," she said.
Moving Metal the Old Way
The traditional car salesperson greets "ups" (customers who walk onto the lot) and personally leads them through the buying process. Car salesmen employ a variety of psychological tactics to excite the buyer, hurry them toward a commitment to buy and then sell the car at the highest possible price. Often, car salesmen are told they should "never leave any money on the table" in other words, they should take as much money as they can from the buyer.
While the Internet clearly offers advantages to many consumers, some buyers are still more comfortable buying the traditional way. They want the sales pitch, they want to test drive the car and get a "walk around" from an experienced sales professional. Dealership sales managers still firmly believe in this approach to selling trying to turn everyone into a "today buyer." These veterans tell trainees "the feel of the wheel will seal the deal." Their pep talks center on trying to "excite" buyers and maintain "control" over the buyer.
However, as consumers learn more about the car-buying process and our society becomes increasingly mobile, loyalties to the neighborhood dealership are disappearing. As a car buyer, knowing you got a good vehicle at a fair price all without battling a pushy salesman for several hours isn't asking too much. In the end, time is money and cash is king.
COMING NEXT: Edmunds.com goes car shopping. An editor will get a price the traditional way from a car lot salesman, then solicit a quote through the Internet department. How do these prices compare? Find out in Part Two.