Imagine a day when dealers and consumers arrive at the same figure for a vehicle's purchase price - and bypass the homework and price negotiation process.
Edmunds.com, a Santa Monica, Calif., company that researches new and used vehicles, plans to make that happen with Edmunds True Market Value Pricing. The service will launch this week.
In an era of growing competition among the plethora of dot-coms providing information for auto retailing, Edmunds.com becomes the first major Web site to offer suggested transaction prices for vehicles for consumers and dealers alike.
The challenge for Edmunds: Convincing consumers and dealers that the Edmunds price is truly valid and independent.
Edmunds.com will use a variety of factors - including regional demand, dealer incentives, actual dealer transaction prices, and sticker price and invoice - to come up with each price. Consumer rebates are not included and would further reduce a price.
An Edmunds.com price can be obtained down to the trim level for any 2000 model and some 2001 models. This summer the service will expand so consumers can add optional equipment and see the recalculated prices.
'It's such a new concept, I think it will take a while to sink in before everybody realizes the ramifications of it,' said Greg Scott, e-commerce coordinator for Ford Motor Co.'s Auto Collection.
Long known for its lists of vehicle invoice prices and incentive data, Edmunds is an independent online information service with a site that attracts 1.4 million visitors a month. The new pricing service will be free to anyone logging onto the Edmunds.com Web site; the company makes money by referral fees from Autobytel.com and other links it has on its site.
National, regional prices
Consumers will be able to obtain either a national Edmunds price for a desired vehicle, or a regional price that factors in regional dealer incentives, said Jeremy Anwyl, Edmunds.com COO.
'Consumers now search ... for invoice and sticker prices, but those are crude yardsticks to determine what to pay for a new vehicle,' he said.
Here's how True Market Value Pricing works:
Edmunds.com uses a formula that includes transaction prices from select dealers, vehicle manufacturer's suggested retail prices and invoice prices, current supply and demand of the vehicle, dealer incentives, color, option availability, published prices on Web sites like CarsDirect.com, and prices from its own surveys with consumers about what they paid for vehicles.
That information is fed into a database, resulting in an 'initial derived price.' Edmunds.com will contact select dealers around the country with its prices on certain vehicles, especially those in demand, for a 'reality check,' resulting in the Edmunds.com price.
The company will use two to three price managers to conduct the reality checks.
'We will double-check our prices with dealers to make sure that the prices are realistic,' Anwyl said. 'These are reasonable prices. They represent a good deal for the consumer and a fair price for the dealer.'
Edmunds.com also will publish a 'valid through date.'
Pros and cons
Dealers could use the Edmunds.com price to show a customer the dealership's price is not out of line with this independent third party, Scott said.
'It gives them a tool to show the customer that you are not overpriced,' Scott said. 'The challenge for Edmunds is to build up a reputation as a valid source of being a third-party pricer.'
Kelley Blue Book has the lead in brand recognition, Scott said.
There is a downside, he said.
'It's a risk for the dealer to wholeheartedly adopt the Edmunds price because if you put it out there, a customer might say, `Who the heck is Edmunds?'' Scott said.
'Then you have to sell them on the fact that Edmunds is a viable third-party pricing service.'
Some shoppers probably will take the Edmunds.com price to the dealer and demand that price, said Steven Wolf, vice president at River Oaks Chrysler-Plymouth-Jeep in Houston.