2/15/2005

New Car Market Emerging

In the article New-car buyers flocking to the Internet, it states that America’s new love affair isn’t with the SUV or even the arrival of hybrid gas-electric vehicles, but it’s with the Internet. The Internet is now crossing the last frontier in the new car buying process – online negation and purchase. Jupiter Research reported last month that Internet generated sales leads and requests for price quotes will account for 22 percent of new car sales this year, up from 15 percent in 2002. So what is fueling this trend? In part, it’s a result of our busy lives. On the Internet, shoppers can cover several, even dozens of dealerships in just minutes, compared to spending days driving form one lot to another. So do you think as this new market emerges and more computer-literate consumers reach the age of buying cars, that it will put the concrete dealerships out of business?

6 comments:

Dr. Tufte said...

I don't know if the internet will put bricks-and-mortar dealerships out of business.

I do know that part of what a dealership - or any other retail establishment - tries to do is close the deal while you are on site. The reason is transaction costs. You lose a little of your consumer surplus for every additional place you have to shop at. The dealership is thinking that if they can make it easy for you to avoid that loss completely, then they may be able to charge you a bit higher price (and capture some of that surplus for themselves).

The upshot of this is that the effect of the internet on dealerships is going to depend on how dependent they are on those profits that are driven by transactions costs. But ... I don't know the magnitude of those, or their importance.

Drake said...

I for one have actually found a car on the internet. Then drove to the dealer and bought it. I agree with Dr. Tufte. The internet in no way will ever put a concrete parking lot full of cars out of business. But it definately has changed the way you find a car to buy. Who knows I could be wrong. Maybe the internet will put brick-and-mortar dealerships out of business some day.

sierra said...

I don't think concrete car dealerships will ever go out of business, but the internet will continue to grow in car sales. Many people look on the internet for the best prices on what they want because they can't get that at one dealership. The internet is growing for all industries, and I believe it will only continue to grow. I know I will always look on the internet first before I buy any car.

rico said...

I don't think that dealerships will go out of business, but we will see increasing competition. Instead of price shopping the dealerships just in Cedar City, you can compare prices with a dealership anywhere in the world! Some of the rip-off dealerships will finally just have to lower their prices and compete with the rest of the world....instead of just the dealership down the street.

Rex said...

I don’t think the internet will put the brick-and-mortar dealerships out of business. Some people will always want to test drive the car before they purchase it. Contrary to popular belief, there are still a lot of people who do not have the internet or would never think of purchasing something they can not physically touch. (My grand parents come to mind) One group of people that may grow would be people who hate dealing with sales people to get the cheapest price. It seems like the net offers lower prices than you can get at the dealer.

Ann said...

I think that the actual car dealerships will always be around. I will always want to test drive and look at a car before I buy it. I think the internet is a good place to look a fair price to pay for the car and it is also a good place for people to research the car they want to buy.
I think what people pay for a car will come down as more people use the internet for research. As people become knowledgeable about the price they should pay for a car, they will negotiate a cheaper price than they did before. And hopefully dealerships will start lowering the sticker price as well.