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FordDirect Moves to Settle E-Pricing Controversy

April 2, 2001

FordDirect.com has launched a revised version of its auto shopping program, which may end debate over a controversial online vehicle pricing practice. The program has been rolled

out in nine states with more to follow, according to Ford officials.

Many states require dealers to offer advertised prices to all customers -- and many automotive Web sites post special prices for online shoppers. Most dealers oppose offering Internet specials to non-Web customers.

FordDirect.com -- a joint venture between Ford Motor Company and its dealers -- will post sticker prices in states such as California that have strict advertising laws. It will function there as a referral service rather than a broker, according to correspondence sent to California dealers.

Using FordDirect, shoppers within minutes can configure, select, price, finance and buy Ford vehicles. The transaction is completed by a customer-chosen local Ford dealer, who would factor in any commissions and have autonomy over the final price.

FordDirect users in New Jersey and Delaware can get a guaranteed, dealer-set online price. In the other states online shoppers can request a quote from the dealer, then haggle from there, Ford said.

Formed last August by Ford and its national 4,200-member Ford Dealer Council, FordDirect was test marketed in New Jersey and Delaware before the other states came aboard.

Ford would not detail FordDirect's results in New Jersey or Delaware, and the company offered no timetable for the service's eventual U.S. expansion, beginning with orientation for dealers in 15 other, unspecified states.

In the states where consumers aren't given an e-price -- California, Georgia, Massachusetts, Nevada, Tennessee, Texas and Washington -- the Web site provides the manufacturer's suggested retail price, or MSRP. From there, consumers can haggle with dealers about the final price, officials said.

So far, FordDirect's e-price application is only available in New Jersey and Delaware. Officials haven't given a timetable as to when this function may roll out in the other states.

In addition to launching FordDirect in four new states, the company also named Devon Cohen, a former executive at DaimlerChrysler Financial Services and Mercedes Benz Credit Corp., as chief executive. He joined FordDirect in March.

FordDirect.com had intended to launch last year in California and offer e-prices but cancelled its plans after high-level discussions with state regulators, instead choosing to pilot in New Jersey.

According to correspondence sent to California Ford dealers, FordDirect.com will operate there as an online referral service -- fielding leads to dealers for a fee -- and post the sticker price.

In Texas, dealers will have a referral program like California, but the fees will be different, according to Karen Coffey, attorney for the Texas Automobile Dealers Association. Charging a fee per referral would be illegal under Texas' anti-brokering law, so dealers will pay a monthly subscription tied to their wholesale vehicle purchases. Subscriptions will range from $99 for the smallest dealerships to $1,499 for the largest.

There was vigorous debate over e-prices in California. State officials said the Internet is an advertising medium, and the FordDirect.com site would have to comply with the law on advertised prices, according to sources close to the discussion.

Of Ford's 4,080 eligible U.S. dealers, 3,194 -- accounting for about nine out of 10 of Ford's vehicle sales -- paid the $99 enrollment fee last year to participate in FordDirect.com.

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