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Car Buyers Doing More Legwork for Less Roadwork

Kicking the tires? Out. A spin around the block to see how she handles? There's less of that going on.

People are changing how they buy new cars and trucks, thanks to the Internet, and it's having a profound effect on an iconic American pastime, according to a new study from business advisory firm McKinsey & Co.

Gone are multiple visits to a series of auto dealers. Instead, consumers are doing more advanced research online ahead of buying a car.

"This is the most dramatic change we've seen in the auto industry and how people buy cars in the last fifty years," said Hans-Werner Kaas, McKinsey's senior partner.

Kaas and his team conducted their study by looking at consumer auto buying patterns at dealerships around the world. It discovered that the average buyer visits just 1.6 auto dealerships while car shopping, down from ten years ago when buyers visited an average of five dealerships.

"The consumer now has more information on-line and through other sources, so they do not need to visit as many dealers," said Kaas.

Simon Soaf, the General Manager at Mossy Volkswagen in Carlsbad, California has already seen the change.

"Those days of going to six or seven dealerships to shop for a car are over. It is not going to happen again. Customers are more savvy," he said.

Soaf says the internet has now become a major player in driving sales. He estimates that almost all of the customers at his dealership have done some type of advanced research on their own before entering the showroom.

As a result, there are fewer people coming in to "kick the tires" and just look around as they did ten or fifteen years ago.

"The business has changed," said Soaf.

"Those days of going to six or seven dealerships to shop for a car are over. It is not going to happen again."

Less Haggling, More Time Saved

When Mona Giamonco decided she wanted to buy a new car, she was dreading running around and visiting car dealers. So instead, she joined the growing numbers of car buyers making their purchase through a third party referral.

In her case, it was Costco.

Last November she picked out a Volkswagen Passat on the Costco website. The retail giant put her in touch with a local Volkswagen dealer who had the Passat at a pre-set price.

Within 48 hours Giamonco bought her Passat for less than the inventory price.

"In the past I would hop from dealership to dealership, taking several weekends, combing the lots trying to get a deal," she said, "But this was so much easier".

This year, Costco is expected to sell 375,000 new vehicles through its auto program.

Who's buying?

Costco says most of the members buying new vehicles are looking for three things: A good deal, no haggling and not to waste time.

"We really save the members a lot of time by doing all that legwork on their behalf," said Jeff Skeen, General Manager of the Costco Auto Program. "They would rather spend their weekends doing something else than haggling with car dealers."

Skeen says Costco car buyers wind up paying about a thousand dollars less than those who visit dealers on their own trying to get the best deal possible.

The three thousand dealers paying Costco for referrals are part of the program because they'll make money down the road servicing the cars they sell. In addition, Costco members tend to have higher credit scores, so closing deals is not an issue.

Is Costco's auto program the way all cars will be sold in the future? No.

But Kaas and his team at McKinsey say this is an example of how the car buying experience is rapidly changing.

"The consumer still uses the auto dealer. Those who can change with their customers will succeed," says Kaas.