How car dealers embrace, and erode, the web

We may finally be seeing how business, when faced with a technological threat, adapts. Not by changing practices. But by waiting until it can develop antibodies to overwhelm the intruder.

Frank Catalano

Twelve years ago, I bought my first car online. Routine as it might sound now, it was a Big Deal back then. The web (still called the “World Wide Web”) was less than a decade old, the dot-com bust was painfully fresh and most companies were still trying to figure out how to address e-commerce. In June 2000, I thought I’d test the waters and get price quotes for a Subaru from three Seattle area dealerships, all by web form and email.

It was a refreshing experience, though it was a challenge finding dealers who would give actual price quotes by email. One accepted my web request, then refused to provide any detailed information in email. Instead, he badgered me by phone insisting everything had to be done in person. His petulant response to my you-are-dead-to-me email: “I didn’t LOSE A SALE by not selling you a car. I hope you pay to [sic] much!”

Ultimately, I wound up with three firm prices, chose a dealership based both on price and the ease of working with them, walked in, test drove the car, did the paperwork and walked out – all in slightly more than an hour. It was quick, it was painless and there were no surprises.

In the nearly dozen years since, two things have happened. First, the tools available to the car buyer have gotten much better. New and used car price estimators, based both on dealer invoice and actual cost, are widespread and as cheap as free (including tools on KBB.com, Edmunds.com and ConsumerReports.org). “Internet sales” reps are no longer rare. The single person I dealt with at the Subaru dealership, who was green and admitted she had the job because she loved the Internet, has evolved into a full-fledged department of three seasoned sales professionals at the store where I just bought my new Toyota.

Consumer Reports provides detailed price advice

And it is no longer equally rare to research, get price quotes or even complete most (or all) of a car purchase online. A study last year by AutoTrader.com and auto market information firm Polk found that nearly 60 percent of vehicle shopping time was online with the average buyer spending 18-19 hours doing web research. Overall, more than 70 percent of car buyers rely on the Internet while shopping for a car, new or used.

But during the same decade-plus, a second development has occurred. The car dealerships have watched. And learned.

Last month, my wife and I decided we wanted to buy a rolling computer with seats (some call it a “Prius”). Armed with price information from KBB.com and even more detailed dealer cost information in a New Car Price Report from ConsumerReports.org, we used the complimentary CR Build & Buy service to send a request for a Prius with specific features, down to color, to local Toyota dealers. We were guaranteed to pay at least $300 less than factory invoice by anyone who responded.

The object of nerdy desire

Almost immediately, three dealerships did. One, though, refused to discuss price any further by email, insisting in a hard-sell phone pitch we had to first show up in person. (It appears there’s one every decade.) Still, we quickly agreed on a price and options with one dealer and set up a time to see and buy the car. We even had the VIN.

And this is where the organism has adapted. Or, should I say, regressed.

My wife and I arrived at the Seattle area dealership at the appointed hour. No car. “I’m sure it’s on the lot somewhere,” claimed our dealer’s Internet sales rep. As time passed it became clear, while we were shown other vehicles and other options, that not only was our car not on the lot, it wasn’t even in the county: it was being driven up from another dealership in Olympia.

The next surprise came in the business manager’s office. We turned down, as planned, the offered extended warranty, maintenance plan and financing package to keep the price exactly as we’d been quoted. But all that increased transparency on pricing? Turns out it only works for factory prices.

Dealerships have figured this out. We were told how, for security reasons on the lot, the dealer had pre-installed an alarm system on all of its cars and we could have it for “only” what turned out to be full retail price, or they’d disable it (later web research turned up both the practice and the “lot security” claims were both common at dealerships throughout the West).

Not wanting brain-dead electronics mind-melded to our bright shiny Prius, I half-heartedly haggled on price and reluctantly gave in. At least the flashing blue light is pretty.

Nearly four hours after arriving, we were done. And this, mind you, was after arriving with a price set, a VIN in hand and a specific appointment to buy a specific car.

Why might a dealership do this in the Internet age? Simple: the only way to counter transparency in national pricing is to increase opacity with dealer-installed extras which are revealed only after the customer is in the store, and make them “optional.” And by making the in-store experience as long and drawn out as possible, customers are more likely to succumb just to get the hell finished so they can finally have lunch.

It is, after all, the desire of a dealer to extract as much money from a customer as possible. It’s no longer in the dealership’s best interests to view the final web purchase step as merely an in-person version of e-commerce checkout. Rather, by making it a waiting game during which the consumer is essentially blind to outside information, car dealers have created a workaround to the web, an effective Internet retailing counter-reformation. No wonder some people complete the sale online as well.

Yes, I bought the car. I got a fair price, because we stood our ground. But the experience, albeit better than when I bought my first car when there was no web, was not better than when the web was new.

You know all those classic science fiction movies where cunning, unpredictable humans beat the annoyingly methodical, intellectually superior machine? This time, the web is the machine. Many car dealers appear to be working hard to outwit it.

Frank Catalano is a consultant, author and veteran analyst of digital education and consumer technologies whose GeekWire columns take a practical nerd’s approach to tech. He tweets @FrankCatalano and consults as Intrinsic Strategy. The names of some dealerships have been masked to protect the possibly repentant.

  • Chuck Taylor

    There’s a reason I don’t buy a new car more than once per decade, and you just explained it.
    We bought a new car on Dec. 31, through the Consumer Reports tool, and it went pretty smoothly — no bait-and-switch. Last day of the year, perhaps they wanted to just move inventory. But they did try to sell us a maintenance contract, etc.

    • http://www.intrinsicstrategy.com FrankCatalano

      We also shopped in the last week of the year (the day after Christmas). If they hadn’t have delivered the exact model promised, we would have walked. But I was surprised at how some of the old tricks have been modified apparently to get around the broad availability of good pricing information on the web. That Consumer Reports tool is invaluable and I recommend it.

  • Mike Stiber

    I’ve had similar experiences using Costco; each time, the dealer tried to sell me something other than what I wanted to buy.

    The only solution is to write your cell phone # on a piece of paper, tell them to call you if they want to sell you a car, and walk out.

  • Wilson

    Frank, considering that you gave in to the alarm system ploy, can you say that you stood your ground?

    • http://www.intrinsicstrategy.com FrankCatalano

      Fair question. On the actual car and options, yes. I had been considering buying an aftermarket alarm and I did negotiate its price down, but I did buy something I hadn’t planned on immediately buying due to the dealer’s tactics.

  • http://twitter.com/chuckgoolsbee chuck goolsbee

    No other consumer purchase is as archaic as the automotive one – the entire process is stuck in medieval times. I love cars, and own many, but never buy them from dealers, and WILL never buy a new car from a dealer ever again so long as this process remains.

    I’d much prefer to order one online direct from a manufacturer or perhaps Amazon, than have to endure the insane price negotiation process ever again. It is ludicrous that we still put up with this BS. No other object available for purchase, especially commodity consumer items, lacks an objective, available, easily comparable price – except the automobile.

    • http://www.intrinsicstrategy.com FrankCatalano

      Amazon: I LIKE that. And if I’m Prime, it arrives in two days. Washed and fueled.

  • JH

    I couldn’t find a link to it, but there is research that shows that the auto industry is their own worst enemy. Because the car buying process is so painful, people actually avoid it. If dealers adopted practices that were more honest and open, people would buy more cars. I know I’ve helpd on to cars just to avoid the buying process. Having people at the dealership for 4 hours isn’t productive, it is leaves you with a bitter opinion of the people you are attempting to do business with and so you likely have no loyalty to that dealer.

    • http://www.intrinsicstrategy.com FrankCatalano

      Exactly. I wanted to walk out feeling good, and instead I felt I’d been dragged through the mud just to end up where I’d planned to be when I walked in. This dealership now has to dig itself out of a credibility hole when – or if – I return to it for service.

  • Ray

    Just bought a Toyota car online.  4 emails back and forth to the sales guy and poof…the car was ours at the price we wanted.  No dealer alarm system add ons.  A half-hearted attempt at the extended maintenance.  Great experience.  Price as agreed…no issues at all.

    • http://www.intrinsicstrategy.com FrankCatalano

      Great to hear. I’m not surprised the experience varies by dealer. The smart seller realizes the profit is in the long-term customer relationship for higher margin service.

  • Ray

    Just bought a Toyota car online.  4 emails back and forth to the sales guy and poof…the car was ours at the price we wanted.  No dealer alarm system add ons.  A half-hearted attempt at the extended maintenance.  Great experience.  Price as agreed…no issues at all.

  • Forrest

    I think the concept of using a dealer is fundamentally flawed to begin with. The last time I bought a car, it worked our very well and I’ll do it again without question.

    What did I do? I found an independent broker who knows the type of car I was looking for. Picking a car at 3yrs old is a sweet spot as there’s a lot of lease returns then, the auction system gets flooded, demands goes down and supply goes up. You also don’t pay for the massive depreciation a car sees in its first few years.

    I told the broker exactly what I wanted – make, model, year, color, engine, options… and I got all but one (largely because what I wanted was already fairly rare.) He found one, had it inspected, and I bought it for a price slightly less than what my target was. I paid less than 50% what a local dealer was asking for the same make, model, options, color, miles… and that equated to about $20k less than what the dealer was asking.

    The biggest difference is that buying from a dealer it’s you vs them. With a broker, they’re on your side as they make sales on their ability to get the best deal, and referrals.

    Almost all of the communication was handled via email. I could have had the vehicle delivered to my driveway if I had, but we decided to make a road trip out of it and go pick it up in another state.

    Three years later, my car was still worth more than I paid for it.

    • http://www.intrinsicstrategy.com FrankCatalano

      While I’ve heard good stories about using independent brokers, in my case I wanted a new vehicle to ensure the hybrid technology had been well taken care of from the start. Yet brokers can be a great option for some.

  • @50champ

    In 2003, we show-roomed a car at the local dealer and then bought the car online and by phone from another dealer 60 miles away. We intended to buy the car from the local dealer, but they couldn’t match our credit union’s lending rate and the dealer from afar could. 

    We used the manufacturer’s website to locate the car/VIN, and the phone to arrange for financing, purchase, and delivery. For $100, they drove the car 60 miles to our home. I never visited the dealership nor met a salesperson in person. The price we paid was factory sticker and comparable to local dealer quotes.

    Why are dealers still playing games like the one above? To Chuck’s point, a poor dealer experience will dissuade referrals and sales – online and offline.

    • http://www.intrinsicstrategy.com FrankCatalano

      While I applaud the ingenuity, it’s sad any of us have to go through these kinds of gyrations just to buy a vehicle without hassle. However, I will say I’m impressed.

  • http://twitter.com/ElevenPointTwo Paul Wren

    I’ve had excellent experiences buying new cars from the fleet offices at multiple dealers.  They want you to come in with the exact model and options, they quote a price, and you are done (i.e., take it or leave it).  No pressure, no haggling, and a fair price that met or exceeded my expectations.  I typically can get one that has not yet been processed at the port, so none of the dealer add-ons have been installed (pinstriping, undercoat, etc.).

  • http://www.intrinsicstrategy.com FrankCatalano

    Timely new data point, of indirect interest: Polk, whose research I cite in the column, today released a new report saying the average age of U.S. vehicles is now a record 10.8 years old (cars 11.1 years, trucks 10.4 years)
    http://www.usatoday.com/money/autos/story/2012-01-17/cars-trucks-age-polk/52613102/1 

    This can’t be good news for dealers, especially those who needlessly complicate the buying process. (And, uh, I appear to be “average.”)

    • http://twitter.com/ElevenPointTwo Paul Wren

      I’m currently driving a 1998 Honda Civic that still gets 34 mpg, and is fun to drive.  My annual repair costs are not trivial, but they are a small fraction of what I would make in payments on a new one.