Dealer use of online auto buying services is growing rapidly, according to J.D. Power and Associates.
A survey of more than 1,000 dealers shows that more than 28 percent of dealer principals subscribe to online auto buying services - nearly triple last year's percentage in a similar survey. An online buying service sends dealers Internet leads for a fee.
'Four out of five dealers who have both an online buying service (subscription) and their own Web page tell us the online buying service is a more effective marketing tool,' said Chris Denove, director of consulting operations for J.D. Power, a marketing research firm in Agoura Hills, Calif.
Still, more than two-thirds of the nation's dealers do not subscribe to an online buying service, and some feel they can generate enough leads without help from a third party.
'The bigger dealers don't tend to use online buying services,' said multiline dealer Ernie Boch Jr., vice president of Boch Enterprises of Norwood, Mass. Boch does not use a third-party buying service because he believes his advertising produces enough online traffic.
Denove says on average, the online buying services send a dealer 37 leads per month, and about six of those prospects buy vehicles. The average closing ratio for a buying service is about the same as it is for normal walk-in traffic - about 15 percent.
But the buying services offer potential for huge closing ratios, if dealers are willing to deliver vehicles to the Internet customer's home or office for a test drive. Bringing a car to the customer's doorstep increases the close ratio to over 50 percent, Denove said.
Though most dealers are satisfied with independent buying services, they are not happy with the buying services set up by the manufacturers. 'Manufacturers still have an uphill battle before they are able to gain the confidence of their dealers,' said Denove.
The problem is that the manufacturers generally try to sign up all their dealers for the buying service. So incoming leads are spread thinly over a large group of dealers. Dealers get discouraged because they receive few sales leads through the factory buying services.
Denove said the manufacturers should sign fewer dealers for the program or offer it only to their best dealers.