Survey of 40,000 Households Shows Half of New Car Purchases to Be Facilitated by Internet This Year

The Internet has become an essential instrument in the U.S. consumers' new car buying process. A Gartner Group, Inc. (NYSE:IT - news and ITB - news) survey of 40,000 U.S. households revealed that 48 percent of all households that purchased a new vehicle from September 1999 through March 2000 used the Internet in their buying process. The survey also showed 45 percent of the households used the Internet to shop for their new vehicle and 3 percent bought their new car online. Only two years ago, the percentage of new car buyers that used the Internet in their buying process was less than 25 percent.

"The online buy-to-browse ratio for new vehicles has been relatively low in the past," said Thilo Koslowski, senior analyst in Gartner's e-Business Services group with responsibility for the automotive vertical market. "However, the fact that virtually half of all new vehicle purchases were influenced by the Internet is simply astonishing. This is a clear message to auto manufacturers and dealers that the current retail process doesn't satisfy the consumers' fundamental desire to make an educated purchase decision."

Gartner's study also showed that the Internet's popularity in the consumers' new car buying process will continue to increase in the near future. Asked to indicate how likely they are to use the Internet in their next new vehicle purchase, 48 percent of all households said that they are "very likely" and 51 percent at least "likely" to shop for their next new car online.

In addition, the consumers' planned Internet usage indicates that the Internet is evolving from a pure shopping tool to an alternative way of buying a new vehicle. Seven percent of the households said that they are "very likely" to buy their new vehicle online, which is up from three percent of households that purchased their recent new vehicle online. Twelve percent indicated to be at least "likely" to buy their next new car over the Internet.

Furthermore, the study showed that finding and comparing prices as well as requesting price quotes will continue to be two of the consumers' most popular online activities in their next new vehicle purchase. The consumers' participation in online auctions or reverse auctions for new vehicles is likely to grow remarkably in the future, while other activities such as reading online car classifieds are not likely to expand as drastically.

"The survey underlines our prognosis that by year-end the majority of all consumers will use the Internet in their new car buying process," Mr. Koslowski said. "The fact that online buy-to-browse ratios for new vehicles are very likely to double in the near future is an alarming signal for car manufacturers and dealers, and good news for online new car buying services. Manufacturers are facing the problem that they might lose potential customers to online new car buying services once these companies establish themselves in the market. Dealerships will be confronted with new Internet based competitors that might degrade them to simple vehicle suppliers."

In order to prevent such a scenario, Mr. Koslowski said manufacturers and dealers need to radically reform the traditional retailing model and focus on building a new and positive buying experience for the consumer. As car manufacturers are rethinking their traditional retail methods, online new car buying services must improve their business model as well. "Online new car buying services that want to increase market share need to address the consumers' diverse preferences in their online new car buying process and should expand their offerings by incorporating multiple ways of buying a vehicle via the Internet," Mr. Koslowski said.

Additional information on the automotive online industry is available to subscribers of Gartner's e-Business Services. These programs are part of a wide range of Gartner services examining the e-business industry. These programs are designed to help senior executives, strategic planners and investors capitalize on emerging opportunities by providing research and analysis on electronic commerce and Internet marketplaces. Additional information on these programs is available on Gartner's Web site at To subscribe to these services, please call 800/419-DATA or 408/468-8009.