Car shoppers often pay more online

Car and truck prices posted on the Net are hundreds to thousands of dollars more than the manufacturers' suggested retail prices, according to a report released today by CNW Marketing/Research.

Like most online markets, when Internet car dealerships began cropping up, analysts said the Web would force car prices down. Consumers could surf the Net to find the best price and use it to drive a better bargain with dealers.

But that theory was based on the notion that online information was accurate and up to date.

After comparing 86 different cars, CNW researchers found the online arm of stalwart car pricing firm Kelly Blue Book was an average of $324 higher; Edmunds.com averaged $579 more.

For a Lexus LS400 luxury sedan, CarPrices.com's price was $2,696 higher than the suggested retail price, the report said.

The most accurate site was ChromeData, which was only $84 higher on average.

"What this says is, you can't just rely on one channel for finding car prices," said Jupiter Communications analyst Rob Leatheran. "I think you need to use several sources of information before buying."

Car companies say the discrepancy has to do with timing. They offer incentives at various times to reduce sticker prices and clear slow-selling vehicles from dealer lots.

Automakers send incentive updates to dealers but not, in general, to the growing number of automobile-oriented Web sites that claim to publish the automakers' official sticker prices.

"There isn't the infrastructure in place to notify all these independent companies...I don't see how it would be even feasible to notify all of these independents," said Gwen Knapp, manager of corporate sales communications for General Motors.

Jim Hall, an automotive analyst for AutoPacific of Tustin, Calif., wasn't surprised by the CNW survey, which also claimed that negotiated prices at dealerships on average are lower than prices secured online.

"Online users don't want the bull--and a big part of the bull is the negotiations," Hall said. "Are they paying too much? Probably, because you can always go into the dealership and beat up a salesperson and get a slightly better deal. But are they better off, and did they save a lot of time? Sure."

Some online car-buying sites contested the survey, while executives at CarPrices.com noted that new software to help consumers negotiate would soon be available nationwide. Many online car-buying sites offer no-haggle prices.

Dean Evans, director of the PriceWar software division of CarPrices.com, said PriceWar will allow consumers to initiate a bidding war among dealers within their geographic region. That means consumers who negotiate through CarPrices.com will get the best of both worlds: the lowest price without any face-to-face haggling.

"If you want to do a price war, we shoot that out to all participating dealers in our marketplace, and bid back the next day with the most competitive price," Evans said. The PriceWar feature is being tested at SDCarPrices.com in the San Diego area and will launch in other cities in late spring.

"Maybe that won't allow the customer to get zero-profit margin on every car, but it allows you to see in your marketplace the best transaction prices," Evans said.

CNW's report also found that most sites had software glitches that allowed customers to order cars with options the carmaker didn't offer or that allowed them to order conflicting options such as a sunroof in a convertible.

Art Spinella, general manager of the Bandon, Ore.-based CNW, said the study was conducted late last month after noticing discrepancies in online car prices.

Analysts note that online car comparisons aren't a barometer for the accuracy of other comparison shopping sites.

Sometimes consumers find deals on the Internet because e-commerce companies are in their infancy and are trying to attract new customers. Many slash prices, many times at zero margins, as a marketing ploy to draw traffic.

The online auto industry doesn't have this kind of market pressure primarily because of its history of price flexibility, Jupiter's Leatheran said. Unlike most consumer products, car prices have traditionally been haggled and constantly change.