The Web Watches You

As great as these sites are, they aren't exactly free. They make money by selling online advertising and linking visitors to vendors selling financing, extended rebates, or other services, says Remar Sutton, a former car dealer and cofounder of the Consumer Task Force for Automotive Issues (www.autoissues.org).

"A lot of these sites make money on things you can do yourself," says Sutton. "It's not as simple as clicking a mouse a few times and you get a good deal on a car and financing. There's more to it than that."

For example, hot links to e-loans may not offer any better deal than your local credit union or bank. Meanwhile, you're being watched. If you've clicked on a manufacturer's site, it's likely your local dealer knows you've been there and what models you've browsed.

"While you're browsing, they collect information, and pass it on to salespeople,' Sutton adds. "That's something you should be aware of when you're out there."

About 90 percent of all new car dealers have interactive Web sites. However, many of these sites are filled with little more than advertising and do not reveal invoice prices or even some rebates. And free sites sometimes have dated or inaccurate information, so it's always a good idea to go to several sites and cross-check the information. At his site, Ostroff recommends buying the accurate pricing information available from such sites as consumerreports.org and fightingchance.com. "The $20 or $30 you pay to get good pricing information may save you thousands," he says.

Some buyers take product and pricing information, and head down to the dealership to negotiate on their own. Others stay online and solicit bids from dealers through referral buying services. Dealers then e-mail or phone fixed prices to customers. If a vehicle isn't in high demand, many dealers are willing to sell cars at invoice or a few hundred dollars above invoice -- the so-called "skinny" deal.

But getting deals like that requires more than a little homework. Phyllis and Kristopher Knipe thought they had a "done deal" when they went into a New Jersey dealership to buy a new Honda last year. Phyllis, director of finance for a record label in Manhattan, had solicited e-mail bids and checked those against invoice prices. A dealership near her home had what seemed to be a fair price.

But Phyllis did a little more digging online and discovered the dealer's true cost for the car was lower than she realized. With this new information, the Knipes went to the dealership and negotiated a deal that was lower than their original quote. The couple got their new price, but then had to deal with a high-pressure pitch from a finance and insurance manager.

It's not an unusual scenario, says Sutton. Dealers can sell at invoice but still make big profits by selling financing; adding on fees for advertising, preparation, and licensing; convincing buyers to purchase extended warranties and towing/rental insurance; and, especially, lowballing (giving you a poor price) trade-ins.

The best advice is to keep the deal simple, says Sutton. Negotiate only the price of the new car, don't wrap the trade into the deal. Negotiate that separately or sell the car yourself -- you'll always get more money. Check out financing before you get to the dealership, then you'll know which rate is best. It's usually better for a buyer to take a big rebate from a dealer, then finance at a slightly higher rate through a credit union.

Originally published in Better Homes and Gardens magazine, March 2004.