Yale Bulletin and Calendar

October 6, 2000

Volume 29, Number 5

Buying cars on Internet saves money, study shows

Consumers can save 2% if they buy their car on the Internet instead of at traditional dealerships, according to the first academic study of Internet car pricing, conducted by business professors from the Yale School of Management (SOM) and the University of California at Berkeley.

The study, "Internet Car Retailing," part of the National Bureau of Economic Research (NBER) E-Commerce Project, examined how Internet referral services affected dealer pricing of automobiles in California during 1999. The study was conducted by Fiona M. Scott Morton, associate professor of economics at the Yale SOM, and Florian Zettelmeyer, assistant professor of marketing at UC Berkeley's Haas School of Business.

The researchers, together with Jorge Silva Risso from J.D. Powers and Associates, analyzed purchase data from Autobytel.com, one of the largest Internet auto referral services, in combination with transaction data from J.D. Powers and Associates, one of the nation's leading consumer satisfaction indexers.

They found that customers are able to shave 2% off their car purchases online for two reasons. On average, customers save 1.6% because car dealers are willing to lower their prices for Autobytel.com, which refers to them many highly qualified sales leads. Customers save an additional 0.4% because Autobytel.com contracts with dealers that offer lower prices to begin with. On a car purchase of $23,696, the average price of cars purchased online, a consumer can expect to save $450.

Based on their findings, the researchers estimate that dealer gross margins on an Autobytel.com-referred sale are $304 lower than the average $1,700 earned by selling the same vehicle offline. However, because it takes less time and labor to serve online customers than in-store customers, it is likely that the average dealer benefits from participating in an Internet referral service, they note.

Among the researchers' other findings:

* Women on average pay 0.5% more than men at traditional car dealerships, as earlier studies have shown. When women purchase online, this bias disappears.

* Online consumers who say they are ready to buy within the next two days save an additional 0.5% (or $118).

* Online consumers are less likely to receive inflated trade-in vehicle prices from dealers; for offline consumers, dealers commonly compensate for potential trade-in losses by charging consumers higher new vehicle prices.

T H I SW E E K ' SS T O R I E S

Yale, Oxford, Princeton and Stanford launch 'distance learning' venture

Endowment grows 41%, to $10.1 billion

Yale doctor applauds end to gender testing at Olympics

Three join team in Provost's Office

Yale-Griffin Center gets $1.2 million from CDC

Letter from the Provost: Support for Teaching with Technology at Yale

Peace accord is topic of talk by George Mitchell

Author Tom Wolfe to recount his days at Yale

New Yorker columnist to visit as a Poynter Fellow

Buying cars on Internet saves money, study shows

F&ES to host centennial celebration weekend

Hershey Foods CEO to give talks as a Gordon Grand Fellow

Works of School of London artists showcased in exhibit

Divinity School inviting all women graduates to convocation

Berkeley Divinity School to laud four theologians at its annual gathering

Artists welcome studio visitors in expanded annual event

Peabody to mark Columbus Day with programs on the Caribbean

Howard Hughes Medical Institute funds biomedical sciences at Yale for 14th year

Before the dive

Yale Scoreboard

Campus Notes

In the News