The new art of the car deal
SCI-TECH SCENE | Oak Brook firm's software helps sellers meet demands of Web-savvy shoppers
Myra Tonini Zak of North Riverside needed a car with leg room and easy access for her husband, James, who needs surgery for a neurological problem.
(Brian Jackson/Sun-Times)
"I hadn't been able to get out to the dealerships so I looked online," said Zak, a 65-year-old retired teacher who is overseeing her husband's care.
She found a 1997 Oldsmobile Regency in mint condition, with 43,000 miles and one previous owner on the Web site of Castle Buick Pontiac GMC in North Riverside, castleguy.com.
Before calling, Tonini Zak took one more step -- to the Kelley Blue Book Web site, kbb.com. Then she told the salesman at the dealership that she would offer no more than the Blue Book recommendation and ended up with a $6,073 deal on a car originally listed at $6,900.
"I was so thankful because I couldn't make all those trips to the dealerships. I needed to be home with my husband," she said.
Joe Castle, the dealership owner, uses locally created technology to ensure that his used-car lots are filled with in-demand, ideally priced used cars. The technology comes from vAuto, an Oak Brook-based company cited in Inc. magazine as the fastest-growing private company in Illinois and No. 22 in America. The magazine cited vAuto's 4,659 percent growth in revenues from 2005, the year the company was founded, to $15.6 million in fiscal 2008. The company has 90 full-time employees, and continues to hire as it forecasts $35 million in sales this fiscal year.
The Web-based software gives dealers a real-time look at "hot-selling" cars nationwide, the price at which they are selling and the supply of inventory on the dealer's lot. The system does in an hour what Castle used to spend until 4 a.m. or 5 a.m. each day doing manually by looking up the online pricing for each car at his dealerships.
The company is the brainchild of Dale Pollak, a Burr Ridge resident, former Elmhurst auto dealer and founder of Digital Motorworks, which collected inventory from dealerships nationwide and supplied the data to Web sites such as SearchChicago.com/autos and to carmakers' Web sites.
Pollak, who sold Digital Motorworks seven years ago to ADP Corp., co-founded vAuto with Michael Chiovari, whom Pollak persuaded 20 years ago to work at his dealership instead of taking a job as a software developer at Microsoft Corp.
Dealerships pay $1,500 to $2,500 a month for vAuto software, depending on the configuration.
Pollak also wrote a best-selling book, Velocity: From the Front Line to the Bottom Line, which explained the Internet-led seismic shift in used-car economics. The Internet created an "efficient market" in which buyers and sellers have relatively equal knowledge, he said.
Before that time, Pollak said, "Dealers 'had their way' with the consumer."
"If you wanted to shop the price, good luck," he said. "You'd have to visit [car] lot after lot after lot and you might never find another car similar to one you liked."
Pollak's second book, Velocity 2: Paint, Pixels and Profitability, advises dealers to be more effective and efficient vehicle merchandisers -- in person and online.
"I talk a lot about the need to be consumer-oriented," he said.
Pollak advises car dealers to be more transparent in their transactions, including explaining to car shoppers how the dealership evaluates the car the shopper wants to trade in.
"The dealer says to the customer, 'Let's show you what the market looks like for your vehicle' by using online data, rather than having someone take your keys, disappear and come back with an offer that's thousands of dollars less than what you think the car is worth," Pollak said.
The vAuto technology uses "bots" to search more than 40,000 Internet sites for cars, their prices, their availability, how quickly they sell, and to take into account the many ways Web sites list and spell car makes and models.
"We had the technological breakthrough to deliver on the new philosophy that dealers should make the pricing, stocking and appraising decision based on price, supply and price sensitivity," Pollak said.
Castle and Pollak agreed in separate interviews that car dealers had become too dependent on manufacturers to sell cars.
Castle said his overall car sales have increased 30 percent to 40 percent in the last two years as he started using the Internet and vAuto software to competitively price and market his inventory.
Zak's vigilance reflects a trend: Car shoppers are increasingly using the Web -- including Web-surfing on their smart phones while standing in the dealers' lot -- to find dealer margins, trade-in values and the actual value of options. Sites such as www.fightingchance .com coach shoppers through the bargaining process.
Mobile applications for iPhones have loan- and lease-payment calculators to check math while finalizing the deal. And specialty Web sites such as Women-Drivers.com, Motherproof.com, Jalopnik.com, TheTruthAboutCars.com and Latinos .onwheelsinc.com appeal to specific audiences' needs.