HAS THE INTERNET CHANGED THE WAY WE BUY CARS?

Yes. It has put traditional dealers on notice that consumers have options, forcing them to become more consumer-oriented. A dealer’s internal customer satisfaction index is now a key element in their overall success. The Internet has provided greater access to information. Much more is now available, but you have to be diligent in evaluating the source of the information. It has shifted the balance of power in favor of the consumer getting a fair price. The time we once spent negotiating the best price can now be used for making a smarter choice which forces manufacturers to be more competitive in safety, reliability and service.

CAN YOU REALLY BUY A CAR ONLINE?

Actually, it is harder than you think. At many online sites, you are not actually buying a car but arranging the purchase through a broker. In many states, car dealers use state franchise laws to actually prevent people from buying online and force them to go through the dealer. Twelve states specifically prohibit the sale of a vehicle through the Internet by a non-dealer: Arkansas, Iowa, Kansas, Maryland, Mississippi, Montana, Nevada, Oklahoma, Texas, Utah, Virginia, Wisconsin. In Maryland, Virginia, Iowa and Mississippi, you may lease a car through the Internet, but not purchase it. Where it’s legal, some sites, such as Carsdirect and Greenlight, allow you to complete the entire transaction online but you’ll likely pick up the car at a dealer.

HOW MUCH CAN YOU POTENTIALLY SAVE BY BUYING ONLINE?

We estimate that there is between $750 and $1,500 in transaction costs that can be eliminated by buying a car online. These savings come through your increased bargaining power and the fact that the Internet reduces dealership inventory and sales costs. Most Internet prices are predetermined and while you can’t bargain, the price is usually a substantial discount from the retail price on the dealer’s lot. You may save more by trying to negotiate for the car yourself, but for many people it’s not worth the extra $100-$200 you might save.

WHAT AM I GOING TO FIND ONLINE?

There are basically four ways you can purchase a vehicle using the Internet:

Manufacturer sites: These allow you to select options and order your car over the Internet giving you the sense that you are actually building a car for yourself. Some reserve special features (VW: paint colors) for Internet ordering. The price is obtained by e-mail quotes from dealers in your area and some of their Web sites have fancy features such as Toyota’s 360-degree view inside a car. However, you can’t use these sites to compare competition and you have to go through a dealer to negotiate the price.

Brokers’ sites: These sites refer you to a dealer. They list certain cars with prices or you can choose the vehicle options and they will send your request to a dealer in your area. If you buy, the broker gets a fee. For example, Autobytel.com puts you in touch with dealers who have signed agreements to be part of the system, but there is no competition among those dealers.

Independent sellers: Greenlight/Amazon and Carsdirect.com actually sell you a car over the Internet then deliver it through a dealer. Greenlight.com will even arrange a test drive from your home. The prices are set and are usually less than the retail price, but may not be the best you could find.

Comparative bidding sites: These sites, such as the non-profit CarBargains.org buying service, offer another option. For $190, CarBargains.org will get five dealers in your area to compete against each other to sell you the car you want. CarBargains does not receive any revenue from the dealer (except your fee) and the bidding dealers agree to honor the price they offer. The benefit is that dealers, knowing they have an actual buyer, seriously bid against each other.

WHAT SITES DO YOU RECOMMEND?

Safety data: www.nhtsa.dot.gov: provides you with crash tests and recall information, and www.hwysafety.org offers crash tests, bumper tests, along with insurance and theft data.

Price information: Sites like the Kelley Blue Book (www.kbb.com), National Auto Dealers Association (www.nada.org) and www.edmunds.com provide invoice and retail prices for new and used vehicles which greatly improves your buying power. Knowing the trade-in value of your used car is a key factor in your new car purchase. By comparing what you’d get selling it yourself with trading it in (retail vs. wholesale) you can determine if it’s worth extra money to sell it yourself. If the difference is, say, $1,500 then an ad in the paper or where you work might pay off. If it is only $500, it’s probably not worth the hassle to sell yourself. Carpoint.com, autotrader.com and cars.com also give you invoice prices as well as ownership and operating information. Carpoint.com tells you if there are currently any rebates or incentives as well.

WHAT ABOUT GETTING FINANCING OVER THE INTERNET?

There are a number of sites that sell financing over the Net. Just remember to compare annual percentage rates and make sure that the financing does not include extras such as extended service contracts and credit life insurance. Car insurance prices are also available and comparing insurance before you buy can tip the scales to one car over another. Make sure that the site offers a wide variety of companies.

HOW DO YOU GET THE BEST PRICE?

Negotiate up: Find out how much the dealer paid for the car and negotiate up from the invoice price rather than down from the retail price. One thousand dollars off of retail may sound great until you find the invoice price is $3,000 less than retail.

Pit sellers against each other: You really can’t negotiate in a vacuum, the seller must know you have other options. That’s what makes the CarBargains.org service so effective.

Be prepared to walk: Always be psychologically prepared to walk away if you don’t feel 100 percent comfortable with the deal — after all, the seller needs you more than you need him or her.

WE DID AN ACTUAL PRICE COMPARISON OVER THE INTERNET. WHAT DID WE FIND?

We picked 12 popular cars and went to three different types of sites: Greenlight/Amazon, Carsdirect and CarBargains. In 10 out of the 12, CarBargains.org had the lowest prices, saving an average of nine percent off of the retail price. Carsdirect.com saved seven percent off retail and Greenlight.com saved six percent.