New-vehicle sales leads generated by manufacturer-sponsored automotive online buying services have exploded over the past year, and closing ratios from online leads have also increased, according to the J.D. Power and Associates 2003 Dealer Satisfaction with Online Buying Services StudySM released recently.

The study finds that sales lead generation from manufacturer services has increased a dramatic 75 percent over 2002—from an average of 18 leads per dealer per month in 2002 to 31 in 2003. Closing ratios from manufacturer service leads have also increased—from 17 percent in 2002 to 18 percent in 2003.

"Manufacturers, although slow to the market relative to independent sites, have entered the online buying market in dramatic form to the delight of their dealers," said Dennis Galbraith, senior director of automotive Web site research at J.D. Power and Associates. "The Internet is impacting the purchasing decisions of vehicle buyers more than ever before, and the quality and quantity of leads generated by online buying services directly impacts which services dealers will continue to use."

The study finds that, in general, independent online buying services deliver the most leads, while manufacturer sites deliver the lowest cost per lead to their participating dealers. Hybrid services, which provide leads from both Internet and non-Internet sources, deliver the highest closing ratios.

The number of new-vehicle leads generated by independent services has increased 25 percent over 2002, from 31 to 38 leads per dealer per month. On average, dealers experience a 15 percent close ratio with leads from independent online buying services—up from 13 percent in 2002. Hybrid services have not significantly increased their lead production or closing ratios. However, dealers average a 26 percent closing ratio from hybrid service leads—the highest of any service type.

On average, both manufacturer and independent sites deliver higher overall dealer satisfaction than they did in 2002, with manufacturer sites experiencing significantly higher satisfaction than independent or hybrid services. Among independent online buying services, cars.com, Dealix, AutoTrader.com and Autobytel.com receive high ratings from dealers.

"How dealers respond to online leads is critical," said Galbraith. "Having a skilled dealership Internet specialist responding to leads from online buying services helps dealers maximize average gross vehicle profits. Responding with up-front discounted pricing also helps. Dealers who withhold price information until Internet shoppers are in the dealership may be driving business away and are typically not making up for it in profit margin. Fortunately, most dealers are adapting very well to the increasing impact of the Internet."

The 2003 Dealer Satisfaction with Online Buying Service Study is based on responses from 1,145 dealers throughout the United States.

(Source: J.D. Power and Associates)