BUSINESS & TECHNOLOGY
Firm Brings Car-Buying Process to the Net
Abhi Raghunathan. STAFF WRITER
(Copyright Newsday Inc., 2000)
iMotors.com, a company that sells used cars in a new way on a new medium, has just expanded to a new
iMotors doesn't have dealerships or an inventory. Customers interested in buying a used car log on to the 10-
month-old company's Web site at www.iMotors.com or call a toll-free number to specify the year, make, model,
style, color and options. The site sells used cars from 1995 onward.
The company immediately gives the customer a price based on a patent-pending algorithm that monitors
wholesale automobile transaction costs across the United States, asks for financing information, which it can
help provide if the customer needs it, and for a $250 credit card deposit, which it says is refundable up to seven
days or 700 miles after the customer receives the car.
Thousands of sites on the Internet sell used cars, but most are online for-sale advertisements or listings of
"They truly have something unique," Chris Denove, a partner with market research firm J.D. Power and
Associates said of iMotors. "They will probably be successful among the limited number of used-car buyers who
are specific about what they want. Whether they are a long- term success will depend on what they do to reach
out to broaden the base of used-car buyers that are less particular about matters such as color and options."
To locate a car for customers, iMotors scours its network of leasing companies and wholesale auctions,
purchases the car with its own money, gives it a 269 point inspection, and refurbishes it at one of its "Vehicle
Service Centers"-large used-car repair facilities in Atlanta, Sacramento, and Cincinnati. The company ships the
car to a delivery center, two of which are located in Huntington Station and 53rd Street in Manhattan. The
process, from the click of the mouse to the turn of the key, takes an average of 3 1/2 weeks. The company says
it sells cars several hundred to a thousand dollars below the Kelly Blue Book price and also offers a limited
warrantee for three months or 3,000 miles.
Rob Erlichman, vice president of marketing for iMotors, calls the company the Dell Computer of used cars. He
said it can make a profit on each sale because it doesn't face problems like bloated inventory and upkeep that
often plague traditional used car dealers. "We've shortened the supply chain," Erlichman said.
Mark Scheinberg, president of the Greater New York Auto Dealers Association, said: "There are still a lot of
questions out there," about whether people will be able to trust buying used cars via a Web site. "Used cars are
not new cars."
Still, over the past 10 months, iMotors has had thousands of customers on the West Coast, and it plans to
expand nationwide in the next six months. "If you want a car in a week or want to drive different ones around,
then we're probably not the best ones," Erlichman said. "But the used car market is a $370 billion market. If we
get a 4 percent market share, we're a 6 or 7 billion dollar business."
GM, Autobytel to test car sales on Net Shoppers will be able to scan local GM stock
Independent Internet-based car-buying services, competing with dealers and manufacturers with their own Web
sites, are struggling to survive.
Some have gone out of business while others have merged with competitors. And some are trying to hook up
Latest: Autobytel.com, the largest car-buying Web site, announced Wednesday that it will run a 90-day regional
pilot program for General Motors.
Under the deal, consumers using Autobytel.com to search for a GM brand will be given a list of inventory at
local dealerships and a special "e-price" for the vehicle. Working on its own, Autobytel wouldn't be able to
provide an inventory list.
GM hasn't identified the specific brand or local market that will be part of the project. And to avoid charges that
GM is unfairly setting prices, dealers involved will determine the "e-price" for each vehicle.
"One reason we want to test this is because consumers, by a 3-1 margin, say they trust an independent Web
site," says Mike Devereux, director of business development for e-GM.
Some who haven't benefited from that:
* DriveOff.com went out of business on Feb. 15.
* Greenlight.com was bought by CarsDirect.com, which is backed in part by Michael Dell, founder of Dell
Computer. Most, if not all, of the 75 employees at Greenlight are expected to lose their jobs once the deal is
completed next month.
* CarOrder recently dropped the dot-com from its name and bought two dealerships with the goal of becoming a
Analysts expect a major shakeout of independents this year and next.
"We will definitely see more consolidation this year, and there will be few left," says Dawn McGreevey, auto
analyst for Gomez, an Internet consulting and research firm.
McGreevey says there is a place for third-party sites because consumers trust an unbiased source. But she
says only three of the 10 to 15 major players will survive the shakeout.
McGreevey applauds GM's pilot project with Autobytel because it lets GM benefit from the independence of a
third-party Web site.
Some dealers are skeptical about the independents' chances to survive.
Mike Jackson, CEO of AutoNation, the USA's largest dealership chain, says dealers working in partnership with
manufacturers can offer better prices and fewer hassles in buying a car over the Internet.
"We run our site with a 100,000-vehicle inventory," Jackson says.
But Mark Lorimer, CEO of Autobytel, says it's way too early to write off the independents -- at least his.
Automakers are hiring Autobytel to train dealerships on using the Internet to generate sales, even if they don't
use Autobytel's service, he says.
"They will continue to work with us, and I see more and more transactions like the GM deal," Lorimer says.
Car dealers get aggressive on Net Sales on Web likely to grow
Every month, five to 10 people fly 2,500 miles from the East Coast to rural Kellogg, Idaho, to buy a new car or
truck from Dave Smith Motors.
They come after visiting Smith's Web site at www.usautosales.com. They get competitive prices and perks such
as skiing, mountain biking, mine tours and free barbecue every Saturday -- rain, snow or sunshine.
It's an example of how aggressively dealers have begun using the Internet to reach customers. So many people
flock to Smith Motors that, in a report out today, Ward's Dealer Business magazine ranks it as the nation's No. 2
e-dealer, ahead of dozens of dealerships in major metropolitan areas.
Ward's picked the top 100 e-dealers based on how many vehicles were sold through their Web sites. Ward's
considers a Web sale one in which the customer's first contact with the dealership was via the Internet and the
dealership's online staff handled the sale.
Industry analysts say that despite the economic struggles of independent car-buying sites such as
Autobytel.com and Autoweb.com, dealers are increasingly selling more cars online. And some dealers predict
the Internet will generate up to 50% of their sales by the end of this year.
"Cars are going to be sold at a record pace online, with many dealers creating their own Web sites," says Rich
West, publisher of Ward's Dealer Business.
Ward's says its top 100 e-dealers sold more than 61,000 new and used vehicles via the Internet last year.
"Our Internet site gets over 4 million hits a year. That's more than the Chrysler Internet site," says Ken Smith,
owner of Dave Smith Motors, which sells every Chrysler and every General Motors brand.
His dealership is the largest employer in Kellogg, population 2,500. He has 40 of his 240 workers handling
Internet sales. Smith expects his Web sales -- currently about 25% of his total sales -- to reach 50% by the end
of the year.
Ward's No. 1 e-dealership is Anderson Honda in Palo Alto, Calif.
Owner John Anderson attributes the success of his dealership's Web site, at www.andersondirect.com, to his
dealership being located in Silicon Valley and to quick e-mail responses from his 12 employees doing Internet
"We don't have the lowest price, but our average response time is under 5 minutes," Anderson says. "And
people are surprised when they get an e-mail response from us at 11:30 at night."
AutoNation, the USA's biggest dealer chain, fared well in the ranking. Its dealerships took 51 of the top 100
Analysts predict more sales will come through the Internet as more dealers build Web sites and a young Web-
savvy generation begins to buy cars.
Baba Shetty, an analyst at Forrester Research, says the next Internet wave will focus on giving consumers a
look at all the vehicles in a dealer's inventory. Both Ford Motor and GM have pilot projects to help dealers list
their inventories on Web sites.
"Not only will dealers use the Internet as a tool, but the Internet as a tool will get better," says Jonathan Gaw, an
analyst for technology research firm IDC.
But Gaw says dealers must be willing to give shoppers a firm price online. "The industry is still struggling to
wean itself from haggling over prices."