Auto Dealers Hit the Road

In recent months, CarsDirect started selling straight to consumers, and Priceline.com added cars to its reverse-auction lineup. And on Monday, the latest site jockeying for position will enter the race, OpenAuto.com, promising to let buyers name their own price. But despite the growing traffic, a recent study raises questions about whether buyers are actually saving any money by avoiding the notoriously heavy-handed car sales force. Buyers who go through Web sites that lead them to dealers or that broker a deal for them end up paying more than would have had they gone straight to the dealer, according to a recent study by CNW Marketing/Research. Surveying 1.1 million car buyers, the firm found that buyers typically paid 6.5 percent more for a vehicle bought from an online broker than if they had gone to a dealer. An Autobytel executive questioned CNW_s study and said the site saves dealers about $1,300 per car in marketing and personnel costs and is able to pass those savings on to customers. Prices at CarsDirect are lower than most dealer retail prices, said CEO Scott Painter. The company sets its prices in the lowest 10 percentile of where dealers have priced theirs in the past month, according to Painter. "If we can_t find a car at the right price, we lose money," he said, adding that the company_s goal is 1 percent profit on each sale. Bid sites such as OpenAuto and Priceline hope to sidestep the question over whether buyers get the lowest price, by letting buyers specify the price they want to pay. If a sale goes through, dealers pay OpenAuto.com $150 per vehicle, while buyers pay no service fee. At Priceline.com, buyers pay the site a $50 fee. With OpenAuto.com, buyers can choose whether they want to finance through the site_s partner, LendingTree.com, through the dealership or through a third party. Priceline doesn_t handle financing, but CarsDirect and Autobytel do. OpenAuto.com also offers insurance through QuickenInsurance, car reviews from New Car Test Drive and information from Kelley Blue Book and MapQuest.com. Meanwhile, manufacturers are jumping in. Ford has invested in Microsoft_s CarPoint, which connects buyers to local dealers and launched in September. The company_s DealerPoint interface is even being distributed by Ford and Honda to their dealers. Ford has another investment in Carclub.com. Dealers are also getting into the online act; more and more of them are selling through their own online sites.