Net Used-Car Sellers Turn to Real-World Mechanics

It's virtually impossible to kick tires, gun an engine or check the oil online.

That limitation has led a number of Web-based used-car shopping sites, including Chicago-based Cars.com Inc. and San Jose-based eBay Inc., to team with brick-and-mortar mechanic and inspection services to help customers reduce their chances of buying a lemon online.

If a franchise dealer sells an off-lease Lexus, customers can expect that car to have been inspected and certified by the dealer, said Jonathan Gaw, an analyst at International Data Corp. in Framingham, Mass. "EBay and Cars.com do not have a history of excellent mechanic services, so in order to sell a used car, they need to provide some confidence that it meets a gazillion-point check list," said Gaw.

Earlier this month, Cars.com launched a pilot program under which Freemont, California-based BestOffer.com Inc. will offer 108-point inspections to customers in Los Angeles, Sacramento, San Diego and San Jose.

BestOffer.com is a start-up itself that launched its mobile vehicle inspection service and auction site in the San Francisco area last November.

BestOffer.com, which is backed by US$17 million in venture funding, maintains a fleet of 30 vans equipped with inspection gear and a Web site on which it auctions the cars it inspects. It dispatches its mechanics to customers' locations to evaluate the vehicles and then charges 2% of the final price on vehicles sold within 45 days through its site.

"This [deal] is about delivering a better experience and taking the hassle out of selling used cars," said Jeff Reed, president of BestOffer. Reed said his firm has performed more than 5,000 inspections thus far.

In general, big-brand national automotive services retailers have shied away from similar dot-com deals. But daring bids to capture consumers' notice and incremental revenues have gotten Saturn Corp. in Spring Hill, Tennesee, and The Pep Boys - Manny, Moe & Jack - in Philadelphia into the game.

A 29% drop in sales last year and a quest for new revenue prompted Saturn strike a deal with eBay under which its dealerships will perform 30-minute, 135-point inspections on any make of used vehicle on eBay's automotive site.

The General Motors Corp. subsidiary was gambling that the US$100 inspection service would attract more foot traffic from potential car buyers at its 400 retail stores.

Five months later, "we're moving ahead with the project, but not at a rapid pace," said Bill Betts, a Saturn spokesman. "There have been relatively few instances where we have interacted with a customer and gone ahead and done an inspection, but they have been done."

Big auto retailers are cautious about doing deals with dot-coms because they stand to lose a lot in customer confidence if the service and execution from the start-ups is below par, Gaw said.

"One problem is that there is not a lot of money to be made in the inspection business, and it's a hassle to develop a program that's not going to generate large revenues," Gaw said.

Pep Boys also launched a dot-com pilot program last month with StraightAway, a Naples, Florida, start-up that assists car owners in pricing their used vehicles, undertaking repairs and getting registered on auction site AutoTrader.com. StraightAway operates from kiosks in nine Pep Boys stores.

In July, Pep Boys launched its own 200-point vehicle inspection program in all 627 of its automotive shops.

These types of services are trying to bridge the gap between the online world and the used-car market, said Rob Leathern, an analyst at Jupiter Research Inc. in New York. "It's a little different with used cars," he said, "because there's a difference in quality and the state of the vehicle."

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