Maryann Keller is president of auto services for Priceline.com of Norwalk, Conn. Nevertheless, she is skeptical about the ability of the Internet to revolutionize auto retailing in general, and auto finance in particular. Priceline.com does not offer its own financing. Keller, 56, is a former Wall Street analyst who has written two books about the auto industry. Special Correspondent Tracy Boyd interviewed her this month. Here are edited excerpts:
Is Priceline missing an opportunity by not offering online financing?
From what I know about the business, we have not missed out on much. The number of people who apply is small, and online lenders tend to get a high proportion of people who are not creditworthy, so the percentage actually funded is quite small. Those who are creditworthy don't worry about getting credit; they go to the dealership and secure it there.
We don't offer auto financing because, at the moment, it is not a big business. We are not losing anything by not having it there. We also present ourselves as a dealer-friendly Web site, and most people use a dealer to obtain financing. We do not want to compete with our own dealers.
What about captive finance companies?
The auto industry is using low-rate loans and deals on leases to help them sell cars. Independent finance companies rarely offer 2.9 percent loans; those are only through a franchised dealer. The objective is always to create an affordable monthly payment for the customer, and there are a number of ways to do that. Offering a cheap loan rate has a lot of appeal. That's not to say that in the future there couldn't be more financing done online. My guess is that auto companies will probably do it in conjunction with dealers.
How do you see that happening?
Well, if you're going to find out that there's a 2.9 percent rate available, you'll find that out from ford.com and not an online lender, because it's a dealer incentive.
I think there will be more online financing in the future, but who controls that business remains to be seen. My guess is the auto companies themselves are becoming more and more sophisticated in Web sites and in their relationships with dealers, and in terms of the functionality of their Web sites, and it seems that these kinds of financing offers would be a natural product to offer.
But you question whether people are comfortable giving personal information out on the Internet.
I do. I'm not sure people will part with the personal information that is required to get a car loan. The population willing to part with more than that credit card number is diminishing.
Is there concern among the automakers that handling credit online could make for dissatisfied customers, who would then purchase a car from another manufacturer?
They have expressed to me their hesitation with giving a 'yes or no' answer. The Internet is a two-dimensional environment: the response comes back yes or no. Let's say you've got someone there with somewhat questionable credit, and based on your scoring system, they don't qualify for a loan.
When this takes place in a dealership, the answer is rarely an outright 'no.' It may be no on a particular rate, or, 'If you want to get this rate, you need come up with an extra $1,000.' Or, 'I wasn't able to get you the 9.5 percent rate, but we can swing it at 10.2 percent, which is another $3 per month.' The whole conversation is softened.
The auto companies right now are focused on people with good credit. They have fewer ways to handle nonprime and subprime customers. They are concerned about discouraging those that fall into these categories. If these people went into the dealership, most of them can be financed somehow. The dealer has access to nonprime and subprime sources who could probably get the customer into that car somehow.
So to present finance as a yes no decision underestimates the complexity. The fact is, there are lots of variables that go into decision making about what kind of financing takes place - not to mention incentives and promotions that are not part of online programs. Incentives complicate the decision for a consumer.