Rise and Rise of Online Car Hunting

Motor manufacturers are generating 75 per cent more US new-vehicle sales leads online than they were last year, according to J.D. Power and Associates.

The recent 2003 Dealer Satisfaction with Online Buying Services StudySM finds that sales lead generation from manufacturer services* has increased from an average of 18 leads per dealer per month in 2002 to 31 in 2003. Closing ratios from manufacturer service leads have also improved slightly, from 17% in 2002 to 18% in 2003.

In general, independent online buying services* deliver the most leads, while manufacturer sites deliver the lowest cost per lead to their participating dealers. Hybrid services*, which provide leads from both Internet and non-Internet sources, deliver the highest closing ratios.

Lead generation by independent services has increased by a much smaller amount (25%, from 31 to 38 leads per dealer per month), and hybrid services not by any significant amount. Close ratio from independent online buying services is up two to 15% but still well short of that from hybrids which remains at an impressive 26%.

On average, both manufacturer and independent sites deliver higher overall dealer satisfaction than they did in 2002, with manufacturer sites experiencing significantly higher satisfaction than independent or hybrid services.

Examples of independent online service sites are Cars.com, Dealix, AutoTrader.com and Autobytel all of which receive high ratings from dealers. Examples of manufacturer online service sites are GMBuyPower and Lexus.com; and of hybrid services, Costco and Auto Club.

Dennis Galbraith, senior director of automotive Web site research at J.D. Power and Associates, says that the Internet is impacting the purchasing decisions of vehicle buyers more than ever before. 'Manufacturers, although slow to the market relative to independent sites, have entered the online buying market in dramatic form to the delight of their dealers... and the quality and quantity of leads generated by online buying services directly impacts which services dealers will continue to use'.

However, how dealers respond to online leads is also critical, according to Galbraith. 'Having a skilled dealership Internet specialist responding to leads from online buying services helps dealers maximize average gross vehicle profits. Responding with up-front discounted pricing also helps. Dealers who withhold price information until Internet shoppers are in the dealership may be driving business away and are typically not making up for it in profit margin. Fortunately, most dealers are adapting very well to the increasing impacts of the Internet'.

The 2003 Study is based on responses from 1,145 dealers across the US.

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.

• J. D. Power and Associates
• All news
• MrWeb info