Chad Charney Individual Project
 

The Internet and How It Impacted the Car Buying Industry

By Chad Charney

How a consumer makes an informed decision to buy a used or new car today is radically different than it was prior to the widespread use of the Internet. Consumers buying cars have benefited greatly from the information they can gather by using the Internet as a resource before purchasing a car. It seems clear that consumers want to use the Internet, with 25% of car buyers using it to research their purchase prior to buying a car. While some of these guides were available in a written book form prior to the Internet being used daily by millions of people, others have only appeared in recent times in cyberspace. The chances of being defrauded can be reduced greatly if you use the resources so easily available on the Internet when buying a used car. In addition, getting a cheaper price is also possible when buying a new car because of what is available to the consumer to know before you enter a dealership by researching the Internet. At the same time, security and legal issues have to be resolved before many consumers would purchase cars solely online because of hackers, identity theft, and other issues that would keep people from buying online. (Helper, MacDuffie, p.3-10, 43).

Kelly’s Blue Book values were available in the written form prior to the free version available today on the Internet. However, the buyer would have had to purchase it to see what the potential value of a car he or she was buying was really worth. This made it much more unlikely for a buyer to check out the true value of a car and was used mostly by dealers decades ago. Kelly’s Blue Book values offers a variety of values, private party as opposed to dealer trade-in values so you can properly evaluate the price of a car and also how much your old car may be worth. It helps the consumer decide if they should trade their car in or sell it privately and uses a grading system for the condition since all cars when used are not alike. Again, free for use on the Internet and widely promoted for consumers to use, a click away on your computer, now being used daily by car buyers. Other sources that are similar are NADA, Edmunds, and Consumer Reports Price Guides, prices may vary but at least you have an educated guesstimate so you can argue intelligently with a dealer or used car owner.

Carfax is the most important tool for consumers to use when buying a used car, not previously available before the last two decades as far as I know. This is an Internet source where you pay for the information on a car based on its VIN number or state registration number. It then tells you the entire history of a car, if it has been in a collision, recalled or stolen. It tells you how many previous people have owned this car and the last owner’s information, and if it has ever failed inspection. It also tells you if someone has tried to create a fraudulent odometer reading. It flags cars that fit into the category if you have bought a Lemon, utilizing the Lemon Law. If it sounds too good to be true, Carfax is the tool to help you decide to buy a certain previously owned car. This is the ultimate source for a consumer to check out prior to buying a used car, again not available until the Internet impacted the car industry as it has helping consumers.

Consumer Reports and their website, Consumer Reports.org, is a magazine and website now also available on the Internet which tells the consumer for free which cars are best and for what purpose. It lets the consumer know if his or her car choice will hold its value over time or will depreciate quickly. Again, an invaluable free Internet tool for anyone to use prior to buying a used car, educating yourself as a consumer.

Another part of buying a used car is the method by which one finds and purchases the actual used car. On the Internet, a free site called Craig’s List is available for any novice to post a car ad or look at what is available at for no charge. It is much better than the local newspaper since it is a free service. You are able to search for any locale, by year, make, and model of the car you are looking for, making it possible to search mostly in the local area in which you live, another valuable incentive for using it. Ebay auctions are now being used by private owners and many dealerships. This makes the choice of buying a car national or global if you are willing to pay the shipping. Before, you simply had a local paper and a local dealership to choose from but due to the Internet, car buyers are shipping cars nationally and globally to purchase the car they really want.

Another obstacle to buying a used car is financing. Prior to the Internet, many consumers financed through a car dealership often paying more than needed. Now there are loan specialists for used cars found on the Internet. According to Louis Rix, director of NetCars, a leading UK website for cars, this empowers consumers because they know how much they can borrow before going after any used car. They are not tied to dealer financing higher rates. Ease of obtaining a loan prior to purchasing a car takes a lot of the hassle out of buying a used car. It simplifies the process of getting a used car loan and can be gotten prior to finding the perfect used car so you know your spending limits.

As simple as it seems to buy a used car, there is a web site expressly to walk you through the steps of buying a car. “ Howstuffworks” Used Cars website is just the place to give you every option of every step of buying a used car. They even suggest a site that is Internet -based called ConsumerGuide.com that has used cars. Autotrader.com is highly recommended for used cars. If it is a new car you want, every major automaker now has its own website to promote the assets of every car in its line. Most new car dealerships have an online component where you can even get a price quote online without ever having entered their showroom. If you want a used part for a used car, ebay or another Internet auto parts site have increased the availability of being able to find an outdated part. The ease in locating, financing, buying, and maintaining a car is simply easier due to the Internet and what it offers to aid consumers to buy a car responsibly.

While consumers can pre-order a new car with any frills they want online as we speak, the future may hold another option for new car buyers. It would be called Buildyourowncar.com which would not have a physical dealership. There would be no real life test drives but the site would generate a video of the car you design yourself to your specifications. In addition, you could play a driving simulation game that would imitate how it would feel to actually the drive you build yourself. The problem with this entire scenario is that cars would have to be like computers where parts are universal. Cars would have to become modular in nature, meaning the parts for one car would have to be more interchangeable with another, which is not in place yet. An example was if you liked the body of a Ford but wanted a Honda engine that is more reliable, could that engine fit into the body of a Ford? This is the stumbling block to make this happen but is being looked into seriously for the future. “Build-to-order” is seen as the vision of where the Internet can take the auto industry in the future. Dealerships would get paid based on providing services rather than vehicle sales because they would provide the conduit between consumers, designers, and assembly plants. According to J.T. Battenberg, CEO of Delphi Automotive, the world’s bigger supplier of car parts, “Build -to -order is the key, it is the game changer in the industry.” (Helper, MacDuffie, p.24-26).

The most problematic and least likely to happen quickly is the “build-to-order” cars because of the crossover of parts needed among the many car choices already in place. Even if the “build-to-order “ vision does not happen, the Internet will continue to impact the car industry greatly. Another way the car industry is impacted is by the new technological advances being offered within cars such as a navigation system, a phone system, and so much more. These services are also offered over the Internet but requires a specialist to install them in most cases and is easier to have installed into a new car. However, this is another aspect of the car industry that has to keep up with the new technological and communication devices available that consumers want available in cars that they buy. They are also sold via the Internet, ebay, car suppliers, and car retailers of both new and used cars. The Internet is a powerful tool for promoting fast communication among large groups of people without spending money on specific specialized software. It brings together buyers and suppliers and it facilitates information exchange. The newest vision is Covisint, which will link top automakers and IT firms to bring to the world a new way of buying a car but it is not in business yet. (Helper, MacDuffie, p.5). Auto dealers are already dealing with Internet informed consumers that are challenging to their traditional retail model. The more consumers know, the more information available to them, the more honest the car dealers have to be to keep their customers. The readily available information is out there thanks to the Internet to keep consumers from getting unreliable data from dishonest car dealers, whether for new or used cars. The Internet’s impact may be greatest in that it amplifies and accelerates the delivery of the voice of the consumer to the ears of industry leaders. To many, this is the most important aspect of the auto industry and consumers’ needs should be heard. The Internet has helped the consumer get his or her fairest possible deal when buying a car.

Bibliography

http://www.bharatbhasha.com/finance-and-business.php/73352

www.Carfax.com

www.kellysbluebook.com

Helper, Susan and MacDuffie, John Paul. E-volving the Auto Industry: E-Commerce Effects on Consumer and Supplier Relationships. Prepared for E-Business and the Changing Terms of Competition: A View From Within The Sectors. 50 pages.

http://e-conomy.berkeley.edu/conferences/9-2000/EC-conference2000_papers/MacDuffieHelper.pd