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Study: Auto dealers move into passing lane

According to the hype, online car dealerships will suffocate brick-and-mortar showrooms while flesh-pressing salesmen go the way of the dinosaur. Not so, says a new survey.

According to the hype, online car dealerships will suffocate brick-and-mortar showrooms while flesh-pressing salesmen will go the way of the dinosaur.

Not so, according to the newest survey of customer buying preferences.

Consulting firm Cap Gemini Ernst & Young found that the popularity of traditional dealers is "surprisingly" strong--and that customers are slightly more satisfied with traditional showroom purchases than online purchases.

For example, the survey found that 77 percent of Americans would prefer to buy a used car at a manufacturer-approved dealership instead of online. U.S. consumers are more willing to use the Internet to buy cars than are consumers in any other country, according to Cap Gemini.

In the United States, 36 percent of Internet users have used automotive sites, up slightly from last year. However, the group of car buyers willing to actually purchase is less than 1 percent of the car-buying population, according to the study.

Because the number of people willing to commit to a car purchase online is so small, Cap Gemini concluded, traditional dealers will play a strong role in the car-buying experience for years to come--even as Internet usage grows.

"It is wrong to look at the Internet as purely a substitutional channel for traditional car sales methods," the study stated. "Rather, it should be seen as becoming an integrated part of a consumer buying process that is becoming more complex as consumers seek to be better informed about what they are buying."

The study also found that increasingly Net-aware physical dealerships are erasing the early gains that some dot-coms pioneered, such as no-haggle pricing and online ordering. Many dealerships are creating sites that list inventory and prices online but still allow the customer to interact with a specific salesperson and test-drive the car at the dealership--satisfying a need that Cap Gemini calls the "touch-and-feel experience."

The study, which polled 7,000 customers in the United States and Europe, determined the main reasons consumers avoid buying online: They want face-to-face advice from their salesperson, and they want to touch and drive the vehicle before they agree to buy it. They also want to avoid the potential security risks associated with purchasing and financing online.

The large number of online dealerships has also confused many consumers, the survey found. In addition to big names such as Autobytel, Microsoft's CarPoint and Cars.com, dozens of sites allow customers to research and order cars online. Even more provide ratings and reviews.

"The dot-coms' problems had to do with with branding," said John Jordan, principal at the Cambridge, Mass.-based Center for Business Innovation for Cap Gemini. "They say, 'I've never heard of you, but you're asking for my household income for financing information?' It's one thing to give your name and address, another to give detailed financial information. Maybe you'll give it to Charles Schwab, but something called Allcarsonline or Gobuycars.com?"

Eli Kuo, spokesman for online car dealer InvoiceDealers in Palo Alto, Calif., countered that Internet showrooms have helped consumers access information and negotiate lower prices--without the hassle of driving to dealerships. He said online dealerships and traditional dealerships must work together--not perpetuate the animosity that has divided them.

"Our whole business is through dealers," Kuo said. "We're a supporting tool for our dealers. We're trying to produce good leads to them."

The survey found that 94 percent of consumers in the United States who bought from traditional dealers were satisfied, compared with 92 percent of customers who made purchasing arrangements online.

The satisfaction gap between traditional and online dealers was greater in Europe. Although satisfaction with traditional dealerships generally remained above 90 percent throughout Europe, satisfaction with online transaction was as low as 70 percent.

Jordan said Europe is ripe for online dealers. Fewer dot-com dealers mean that customers are not as brand-confused as they may be in the United States, and the heavy adoption of wireless technology throughout northern Europe opens a wealth of opportunities.

"A major story here is the very marked differences in European markets," Jordan said. "For years we've been assuming that everyone will look like the U.S. when they grow up, which is wrong here. Infrastructure and wireless usage certainly change things...And financing deals is very different in Europe as well."