Buying Used Cars Online
The end of the tire-kicking era?
Created by Tom Morr
Used-car buying has always been shrouded in sleaze. Justified or not, the average used-car salesman is stereotyped as an unscrupulous lech who'd say and do anything to unload a "cream-puff" on you.
Sight-Unseen?
Conventional wisdom has always warned buyers to beware when swimming in the shark-infested waters also known as the "used car lot." Scrutinize every aspect of the vehicle before making the deal—or suffer the consequences later.
But retailing in the 20th Century caused buyers and sellers to reevaluate their preconceptions. After all, who'd want to buy clothes that they couldn't try on first? Millions of people, apparently, judging from the enduring success of mail order companies such as L.L. Bean and Eddie Bauer. Just as blank cassettes didn't put the record companies out of business and VCRs weren't the death knell for movie studios, mail order catalogs merely provided another way to buy and sell.
In the automotive marketplace, services such as Autobytel and AutoVantage set out to demystify car buying roughly a generation ago through pre-negotiated, no-haggle fleet prices on vehicles purchased through participating dealers. Thanks to the Internet and e-commerce, the way the deal goes down continues to evolve. The Web made car buying even easier, or at least made previously proprietary knowledge available to car shoppers to aid in their decisions. The focus was on new vehicles—buyers knew that manufacturer warranties were in effect, so confidence wasn't an issue. Companies such as CarsDirect took vehicle buying a step further, fostering relationships with both new- and used-car dealers.
For Sale By Owner
Private-party used-car classifieds started to appear online in the late '90s. Many were for collectible vehicles whose owners took a why-not approach to reaching non-local buyers. Cars even showed up on eBay, originally in the Diecast Model category. By 1999, cars had their own category on eBay, and a dedicated subsite, ebaymotors.com, was launched in 2000.
(According to independent audits, ebaymotors.com is currently the most-visited automotive site on the Web, logging 4.78 million unique visitors during December 2001. eBay projects that $3 billion of used cars will be sold on this site in 2002.)
Why would someone buy a used car sight-unseen at an online auction? eBay noticed that valuable memorabilia and collectibles had changed hands on the site since its inception in 1995 and theorized that the car-buying experience shouldn't be that different. Strangely, the company cites the "intimacy" of online transactions as a cornerstone of buyer's confidence throughout the site. Although about half of the used cars listed on ebaymotors.com are from independent dealers, buyers often feel like they're dealing with Joe or Steve or whomever instead of Honest Charlie's Seldom-Driven Cars. Some even become email buddies after the transaction. As or even more importantly, eBay's Feedback system allows buyers to research sellers and contact previous buyers about their experiences with that seller. It's kind of a built-in, grassroots Better Business Bureau.
Still, the average used-car buyer might have reservations about bidding on something they've never seen. To allay these fears, eBay Motors instituted what it calls the Assurance Program. For starters, a no-cost limited warranty covers major mechanical/powertrain failure for one month or 1,000 miles. Next, purchase insurance protects buyers against fraud or misrepresentation up to $20,000 with a $500 deductible. Payment protection allows the seller to obtain a deposit from the buyer and the buyer to put the remaining balance into an escrow account (for a fee) to help ensure satisfaction for both parties. Finally, eBay Motors contracts with professional vehicle inspectors to personally assess and report on a vehicle's condition for $99.95 at the request or either the buyer or seller. Because 70% of ebaymotors.com transactions are out-of-state, the site has a deal with a national auto-transport company to extend commercial rates to its online-auction customers.
One final benefit of this national (and sometimes even global) marketplace is price normalization. Since vehicles sell for whatever the market will bear (each vehicle listed on eBay Motors reportedly averages seven bidders), buyers can better assess the true value of a used car. eBay Motor's relationships and cross-listing options with Auto Trader and Kruse Auctions further exacerbate price stabilization.
Another misconception is that the majority of the auctioned vehicles are exotics and collectibles. According to eBay Motors, the top-three sellers are the Ford Taurus, BMW 3 Series and Honda Civic.
The bottom line is that technology now offers used-car buyers yet another way to look for a good deal. Actually looking at the vehicle ahead of time appears less important now than it used to be.
Resources
Autobytel,
www.autobytel.com, AutoVantage,
www.autovantage.com, Auto Trader,
www.autotrader.com, CarsDirect,
www.carsdirect.com, eBay Motors,
www.ebaymotors.com, Kruse Auctions,
www.kruseinternational.com
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