October 25, 2013

News & Features

Online research benefits both car buyers and dealers

The Atlanta Journal-Constitution

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Shopper Jennifer Williams reviews warranty information at the Nalley Lexus dealership. (Brant Sanderlin / The Atlanta Journal-Constitution)

When Jennifer Williams walked into the Nalley Lexus dealership in Georgia recently, all she needed was a salesperson to provide her a good deal on her trade-in, the keys to her RX 350 SUV and a happy wave goodbye.

Thanks to the Internet, Williams had done her research ahead of time and already knew what cars were available on the lot, as well as their features, price and even ownership and mileage records.

"I just needed to know what [they were] going to give me for my trade, talk interest rates and see if they could take a little bit off" the price of the car she wanted, she says.

More online
    Visit NWautos.com to research vehicles, find dealers and get local price quotes.

Williams is the epitome of the new shopper, industry experts say. Unlike a decade ago, today's car buyers walk in the door with almost as much knowledge about what's on a lot as the sales staff.

"The opportunity to negotiate has almost been eliminated," says Sid Barron, general manager at Lexus South, emphasizing that this is especially true among young car buyers who may not even understand the concept of negotiating. "You have to build value."

The industry is making up the lost negotiation edge through stronger volume — car sales have surged since 2009 — and by capturing more of the service business.

"Dealers are getting more aggressive on pricing, such as oil changes," says Rick Nelson, an analyst for research firm Stephens. "They also throw in loaner cars of the quality that customers expect."

Dealerships now realize they can improve one-on-one relationships with customers through the Internet. The average consumer spends 19 hours researching before a purchase, 11.4 hours (60 percent) of that online, according to a JD Powers study.

Dealers accumulate email lists to blast out news of bargains, new shipments and updated models to past and interested car buyers. Service departments are savvier about updating motorists on scheduled maintenance through emails.

And dealerships' efforts to gain an edge over their competitors have led to more transparency about inventory and pricing, giving consumers more information than they had in the past.

As a consequence, online car shopping has almost eliminated the need to go from lot to lot searching for a vehicle.

"Prior to 2006, customers visited an average of 4.1 dealerships before purchasing a vehicle," says Craig Monaghan, president and chief executive officer of Duluth, Minn.-based Asbury Automotive Group. "Now, customers visit an average of 1.3 dealerships prior to purchasing a vehicle."

What consumers can't get online they can request through email. But dealerships have to act fast. In a world where almost everyone has a smartphone and expects instant communication, a dealership's failure to respond quickly is almost the equivalent of showing a lack of interest, experts say.

"You have to get back to them in an hour or, better, less than an hour," says Steve Mader, owner and general manager of a dealership in Newnan, Ga. "And you need to get back with a transaction price that is realistic, and other options in case you need them."

Car-lot owners say they like the more-informed customer.

"Asbury believes this upfront education is good for both the dealership and the consumer," Monaghan says. "It allows us to build an open, honest, long-term relationship. Another benefit to such an extensive amount of research beforehand is that it can lead to a quicker purchasing process, which is mutually beneficial."

Williams agrees. She says she upped her understanding of how the industry negotiates deals because she was burned in past purchases. Now, she says, she often knows more than the salespeople. "I like to leave thinking that I got a good deal and that they didn't lose money," she says.

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