Shopping for a Used Car

Car retailing is on a long test drive, rolling through the changing landscapes witnessed in everything from buying clothes to kitchen cabinets. Mergers, the Internet and a variety of other developments are changing the structure of the industry, and those changes are reflected at the consumer level.

Manufacturers and dealers see the balance of power now tipping to consumers, which is putting customers in the driver’s seat. This shift is largely due to the Web and the information it makes available to people in the market for new and used cars. Web sites also play a role in vehicle sales, although it’s still unclear what works for consumers, what works for manufacturers and dealers, and how all the different approaches will be sorted out.

Industry response has focused on making the car-buying experience more consumer-friendly. Recent studies from the University of Michigan’s Office for the Study of Automobile Transportation (OSAT) suggest that still more changes are on the way. Phrases such as “gently used” signal some of what’s to come. Bruce Belzowski, OSAT senior research associate, says that “car dealerships are moving toward a real-estate-like experience” by giving car buyers the feeling that the dealer is working for them.

Definitions are becoming a problem. Traditional franchise dealers and independent used-car dealers are still around but in smaller numbers. Multifranchise dealerships and auto malls — some with a dozen or more makes under one roof — are getting to be the norm.

Nontraditional channels include players from outside the auto industry. Circuit City perhaps pioneered this trend when it opened its first CarMax in 1993. The used-car superstore was among the first to adopt a no-haggle approach. In April 2002, Wal-Mart decided to test the used-car market by leasing space adjacent to five of its stores in the Houston area to a national dealership chain for six months. Throughout that time, Wal-Mart and the dealership, Asbury Automotive, will monitor the program and decide whether or not to expand to other markets, a common practice for the retail giant.

CarMax remains the sole no-haggle, used-car superstore now that AutoNation no longer fits that category. But Hertz sells off-rental cars on a no-haggle basis, and some traditional new-car dealerships have no-haggle, used-car pricing. AutoNation still uses a no-haggle approach for its online used-car sales but takes the more traditional negotiating road in the bricks world. Wal-Mart says the Price 1 stores, due to open in early June 2002, feature no-haggle prices and a five-day, no-questions-asked, money-back guarantee. In new cars, no-haggle has worked for Saturn, although no other manufacturers have tried it.

Number of Dealerships


Source: CNW Marketing Research Inc.

Is no-haggle pricing here for the long term? It’s likely, but industry observers generally don’t expect no-haggle dealerships to become the norm. Haggling may return, says Tom Kontos, an analyst and vice president at Adesa Corp., which provides vehicle remarketing services to the industry. In any case, Kontos doesn’t see any more no-haggle or “big box” dealerships opening in the near future.

The use of the Internet may even lead to fewer no-haggle options. “Now that consumers have all these advantages, they want to haggle,” Belzowski says. “They’re armed with all this information, and they may come to the dealership more willing to negotiate.”

Private sales remain an important option, and that’s evident when you look at local newspaper car classifieds or at the FSBO pages and classified ads on cars.com.

But whether you haggle or don’t, you’ll find that the larger the dealership — online or on the lot — the wider the choice. Whatever the future of superstores, Kontos says, “they’ve given consumers a whole new concept and model.”

If you’ve got a limited budget, then shopping at a high-volume dealership can save you money, says Paul Taylor, chief economist for the National Automobile Dealers Association (NADA).

You’ll still encounter potholes on the way to your next vehicle purchase. But you’ve also got a growing toolbox of information resources and more choices — whether you’re buying new or used — to help you plan your strategy and get what you want.

Information is the key point. Combined with the industry’s uncertainties, it’s your strongest tool in making the best use of the buying options you now have. No matter how friendly the atmosphere is, you can’t afford to be off your guard. What you know is likely to be more important than where you buy. Today, the Web is your best source of information.