Many wild-eyed expectations about the Internet's power evaporated after the Nasdaq bubble popped, but two recent research studies have found the Web is still good for at least one thing: finding a cheaper car.
People who buy cars on the Internet pay about 2 percent less, on average, than people who go to a dealer in person, while African-American, Hispanic and female car shoppers -- who usually pay higher prices when they go to car lots -- end up paying about the same as white male buyers, according to studies published recently by the National Bureau of Economic Research.
There are many reasons car-shopping on the Web is cheaper, but one big reason is that it gives an advantage to people who ordinarily shy away from haggling over prices, according to UC Berkeley economist Florian Zettelmeyer, Yale economist Fiona Scott Morton and J.D. Power & Associates researcher Jorge Silva-Risso, who studied sales at Autobytel.com, a unit of Autobytel Inc. "Consumers using this service disproportionately dislike bargaining and would have done poorly through the traditional channels," the NBER said in a summary of the report. "In other words, those who choose to use the Internet have the most to gain from it."
Autobytel shoppers could save $240 million a year, the report found -- and there are several other car-buying sites on the Web, which could add up to numbers big enough to make the auto industry take notice.
African-American, Hispanic and female buyers usually pay 1.5 percent more for cars than other groups in traditional settings and benefit even more from shopping on the Web, according to a separate study by Zettelmeyer, Morton and Silva-Risso.
Though the economists found no evidence of discrimination at car lots, they did find that some groups often pay higher prices because, on average, they have less access to information about cars and prices, a real drawback when trying to talk a dealer down.
But the Internet levels the playing field, they said, letting African-American and Hispanic buyers pay the same prices as white buyers and cutting the gender gap to just 0.5 percent.
"The Internet is disproportionately beneficial to those who have personal characteristics that put them at a disadvantage in negotiating," the economists wrote. "African-American and Hispanic individuals, who are least likely to use the Internet, are the ones who benefit the most from it."
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