It's nearly two decades into the age of Internet car shopping, but despite the information explosion, most buyers don't have a clue.
In fact, at least one shopping expert argues, neither do some of the online services that a lot of people count on to guide them toward the best price for the new cars they crave.
As the Internet has made car shopping seemingly more transparent, the auto industry has moved to change the process to make the waters even muddier.
And as the Web has let people shop nationwide, freed from the tyranny of often-uncompetitive local prices, it also has let dealerships see what rivals everywhere are offering — effectively leveling prices because no dealer is likely to offer much bigger discounts than the competition.
While sharp-minded buyers are likely to feel almost smug nowadays, armed with more inside information than ever, it can be incomplete and misleading. Buyers in some ways are as vulnerable as ever to professionals whose livelihoods depend on making the sale.
To probe the secrets of car buying and data available on the Internet, USA TODAY invited representatives of six shopping services to a roundtable discussion at the Los Angeles auto show. They were candid, even blunt, and what they said sometimes was shocking.
One key point: What once was the holy grail of in-the-know deal-seekers — uncovering the dealer's "invoice price" (what the dealer paid) for a new car — now is easy to find on the Net.
But at the same time, the industry is making that "price" increasingly meaningless.
Automakers have fattened dealers' "invoice" or wholesale price so it looks as if they're paying a lot more than they used to — perhaps 95 percent of the retail sticker price, vs. 85 percent before Internet car shopping began in the mid-1990s.
But that modern invoice number now is padded enough to let automakers send significant sums back to dealers in hard-to-track give-backs and bonuses that make the dealers' real (and well-hidden) wholesale cost for the vehicle well below "invoice."
Such give-backs are beyond the traditional "holdback" by most automakers that has long inflated the invoice price. The holdback is an amount roughly equal to 2 percent of the sticker price (it varies by automaker, and a few don't use the practice) that the car companies usually refund to dealers periodically. It also has given automakers leverage over dealers, which are independent franchisees — the car company can withhold the amount if dealers don't meet automakers' requirements.
The dealer rebates inflating today's invoice prices, beyond holdbacks, vary.
• Some rebates to the dealer are variable amounts based on meeting sales quotas — and are sometimes even retroactive to the previous quarter. The quota rebates can mean that even the dealers might be uncertain of their final cost per car until they sell their final car of the period.
• Some rebates are so-called "atta-boy" payments of up to hundreds of thousands of dollars for high scores on the customer satisfaction surveys sent to new-car buyers.
• Some are simply the old-fashioned, direct factory-to-dealer incentives, often unadvertised, that might or might not be passed along to buyers.
Why all the complicated give-backs?
"It tells me that (automakers) and dealers responded to the publishing of invoice pricing online and said, 'We need to find another way to mask what (dealers) are being paid so that people don't feel like they're getting screwed,' " says Patrick Olsen, editor-in-chief of Cars.com and a roundtable participant.
Another participant says we shouldn't be surprised. "The fact is that consumers still think the dealer invoice price has some magic to it. It doesn't," emphasizes James Bragg, head of Fighting Chance, a small car-buying advice-giver he founded in 1993. "We let ourselves, over the decades, get conned into believing that a family with a $10 million net worth, of which $7 million is in car stores, is going to let you and me know what they're paying for their cars. Does that make sense to anybody? That's nuts."
But perhaps surprisingly, given how often they use "invoice price" as a touchstone, many brand-name online car shopping sites tend to agree with Bragg's dismissal of that price.
Exception: Jessica Caldwell, Edmunds.com's director of pricing and industry analysis. She says the invoice, however true or false, is another data point, and "every piece of data you have out there is helpful and can be critical" as a shopping tool.
In addition to Caldwell, Bragg and Olsen, at the table were: Larry Dominique, executive vice president at TrueCar.com; Jared Rowe, president of AutoTrader.com, which acquired Kelley Blue Book and its KBB.com in 2010; Jake Fisher, head of auto testing for Consumer Reports, who is involved with the magazine's pricing data and who buys from dealers the cars the publication tests.
Buyers don't want a deal?
Bragg, a peppery contrarian, considers the big-name shopping sites no friend of buyers, arguing that they don't work hard enough to show the lowest prices.
Rowe says that might be so, and — with an attitude likely to stun hard-core horse-traders — explains: "Overwhelmingly, our research shows that consumers ultimately don't want the best price."
"We have data to support exactly what he said," adds Dominique. "We do post-purchase surveys of 100 percent of our consumers, and the ones who paid the least for their cars are the most dissatisfied with their cars. The ones who paid average or above average are actually the more satisfied."
How is that possible?
Those who didn't haggle over the last dollar "spent an average of one to two hours less at the dealership. They feel they got treated fairly on the price, they feel they got treated fairly on" financing and trade-in values, Dominique says.
Adds Olsen, from a personal experience, "I went to buy a car and the dealer sat down and said, 'I want $300 over invoice,' and I said, 'Fine with me. Let's do that and cut a deal right away.' It wasn't rock-bottom price. It wasn't even the invoice price. And if I really pushed, maybe I could have spent three more hours of my life arguing with this guy," but it wasn't worth the hassle.