No Need to Kick Tires, Just Sign On and Click to Buy Car
Jumping into the hot market for auctions on the Internet, Irvine-based Autobytel.com Inc. said Thursday it will become the first company to auction new and used cars on the Web.
The auctioning of cars from dealers and individuals comes as online auto sellers struggle to find the right strategy for selling vehicles on the Internet. Autobytel’s decision pits it squarely against online auction giant eBay Inc. and other Web players, such as Amazon.com, which hosts sales of used cars by individuals.
Still, investors were excited by the news, which leaked out Thursday morning. Autobytel stock soared 46%, or $6.19 a share, to $19.50, in Nasdaq trading. The company formally announced the move after the market closed. Autobytel was the 11th-biggest percentage gainer in U.S. markets.
Company executives expect most of the cars auctioned on Autobytel’s Web site will be used vehicles, but also hope it will be used to sell new cars late in the model year.
“eBay and Amazon are not doing a very good job of auctioning cars and we’re counting on the reputation we have built with consumers,” said Ann Delligatta, Autobytel’s chief operating officer. “It’s one thing to auction Beanie Babies and it’s a very different thing to auction general transportation.”
On Amazon’s auction site Thursday, only a few dozen vehicles were for sale and the vast majority had not received any bids.
Industry observers doubted car dealers would ever sell most of their new vehicles through online auctions because they want to control and maintain a base price. But manufacturers and dealers could sell some of their less-popular models that way.
“It’s a way to get rid of all those Plymouth Neons that are sitting on the lot at the end of the model year and won’t move,” said David Cooperstein, an e-commerce analyst with Forrester Research.
Online auctions already are being used by retailers and manufacturers to sell surplus goods and last year’s models of everything from clothes to consumer electronics to computers, and cars would be a natural extension of that trend.
The idea of online used-car auctions comes with even heavier burdens, combining consumers’ qualms about buying used cars and making large purchases sight unseen.
Autobytel has enlisted several companies to offer features designed to put people at ease.
For example, customers could request that a professional assessment of the car be done through Autobytel’s partner, CCC Information Services Inc., which has a network of 15,000 auto body shops across the country that, for a $70 fee, will inspect and take photos of the vehicle.
Autobytel has made similar arrangements with other companies to offer services such as setting up escrow accounts to hold money until the buyer is satisfied; transporting used vehicles from the seller to the buyer; and providing pictures of a car’s interior, exterior and mechanical details online.
But analysts said consumers’ urge to see and test drive a vehicle will be too strong.
“There’s no question that there is considerable consumer excitement about cyber auctions,” said Christopher Denove, director of consulting operations at J.D. Power and Associates. “Although it’s true that there is a niche for people looking to purchase vehicles through auctions, I would not expect any dot-com company’s auction program to be a runaway success.”
eBay’s experience shows people won’t bid the market value for a used car in an online auction, Denove said, because they are concerned about the vehicle’s condition.
The features Autobytel has implemented may assuage some potential buyers’ fears, but they also add cost to the transaction, eliminating some of the cost advantages that online auctions might have, Denove said.
Autobytel’s new wrinkle comes as the online car-buying field grows more competitive, with rival Autoweb.com Inc. debuting a similar service this week. eBay, the No. 1 Internet auction service, added cars in August.
But even with a two-month head start, eBay has fewer than 1,000 cars available. Autobytel said it will have “a couple thousand” cars available today when it launches its auto auction site. Many of the vehicles will come from dealers who already are part of Autobytel’s new car sales network.
Autoweb’s auction is limited to used cars in California from dealers. The company said it hopes to expand the service nationwide by year’s end, and include new cars and individual sellers. The site, which went live Wednesday, has fewer than 200 cars.
Autoweb’s program only includes car dealers and features a money-back guarantee, which company officials believe is necessary for the program to work.
“People in the end will need to get down to look at the car, and once they’ve settled on a price, they still want to see it and drive it before they sign the check,” said Norm Turner, the general manager of Autoweb’s auction.
