To use the free service, set to debut on November 1, consumers specify what car they are shopping for, including options and accessories. Dealers will then send shoppers binding bids on the cars, according to company executives.
The format will differ from many of the existing players in an increasingly competitive online car market, which includes Priceline, Autobytel, AutoWeb, and others. Recent studies indicate that 40 percent of new car buyers are using the Internet to shop for a car.
Unlike Autobytel and AutoWeb, which refer buyers to only one dealer within their network, CarPrices.com promises to provide consumers with multiple bids from different dealers. Unlike Priceline, consumers don't have to commit to buying the car through the service and don't have to tell dealers what they are willing to pay.
Like many of its rivals, however, CarPrices.com will be limited geographically, serving only the San Diego area when it launches.
Company cofounder Ahmed Ghouri said CarPrices.com has "aggressive" expansion plans. Although he declined to say when the service would be available in other areas, he would not rule out moving into another, new market by the end of the year.
"A national [launch] is right now being planned," Ghouri said.
CarPrices.com plans to make money by charging dealers for putting them in touch with car shoppers. But Chris Denove, director of consulting operations for J.D. Power and Associates, said both dealers and consumers may be reluctant to use CarPrices.com's service, though it is free for the latter.
Consumers can get bids on their own by sending email directly to dealers, Denove said, while price-conscious car shoppers may find that the bids they receive are higher than what they want to pay. Meanwhile, dealers will inevitably pass on CarPrices.com's charges to car buyers, Denove predicted.
Dealers also may be reluctant to use a service that compares their prices head-to-head with those of competing dealerships. "I expect that they're not going to have a lot of dealer cooperation," Denove said.
Ghouri dismissed such concerns. CarPrices.com has already signed up about 75 percent of the dealers in the San Diego area, he said.
Consumers will benefit by receiving "rock-bottom prices" on cars, he added. "It's a price war that benefits consumers," Ghouri said.