Conflicts over online automotive marketing center around two questions: Who can sell a car, and where?
Bruce Gould, executive director of the Virginia Motor Vehicle Dealer Board, says state laws are meant to protect consumers from fly-by-night operators, confusing advertising and undisclosed fees.
And, he adds, the issues aren't new: The Virginia board adopted guidelines for Internet marketing of new cars in 2001 that still hold up today. They state, for instance, that "the consumer must visit a licensed Virginia Motor Vehicle dealer to complete the sale and take physical possession of the vehicle."
But longtime industry issues like that continue to bedevil online third-party lead generators and the dealers they work with.
Laws vary from state to state, but the key issues are:
- Advertising invoice price. Regulators and industry associations say the term "invoice price" is misleading to consumers. Karen Phillips, general counsel for the Texas Automobile Dealers Association, puts it this way: "Invoice doesn't always mean the same thing for everyone concerned. Our benchmark in Texas is MSRP. You advertise MSRP."
But there's a distinction in the online world. Information-only sites such as edmunds.com include invoice prices on their build-and-price pages. The distinction, says Donna Sechrist, senior vice president for dealer initiatives at Edmunds.com, is that Edmunds doesn't guarantee the site's suggested price. The consumer takes it to a dealer and negotiates, she says: "The dealer sets the price."
- Bird-dogging. This refers to dealers paying a fee to individuals who steer a buyer into the store. Regulators don't like the idea, saying the fee will be built into the deal somehow. In some states, fee-for-sale lead generators are considered to be bird-dogging.
Dealer Jeff Carlson, owner of Ford-Lincoln and Subaru stores in Glenwood Springs, Colo., says a bird dog also circumvents laws that salespeople be licensed: "Are they salespeople? If they're a salesperson, they need to be licensed."
- Brokering. A broker will negotiate a deal for a consumer for a fee. The Texas association's Phillips says that, online or not, the extra cost is unnecessary.
"I don't hear a need for a broker," she says. "The only entity I ever hear that thinks brokering is good is the broker because they want to make money. I don't hear it from dealers. I don't hear it from consumers."
- Curbstoning. This refers to the practice of "flipping" large quantities of used vehicles by unlicensed dealers who evade sales tax and sometimes sell salvage vehicles with false registrations. Sales may occur on vacant lots or streets.
James Moors, director, franchising and state law at the National Automobile Dealers Association, says some online selling may violate anti-curbstoning laws, leaving consumers without recourse when a deal is fraudulent.