November 8, 1999

FutureWeb:
CarsDirect.com Cuts Auto-Buying Hassles

By Jennifer Mateyaschuk

At A Glance:

CarsDirect.com City: Sherman Oaks, Calif. Top executive: Bill Gross, co-founder and board member, Scott Painter, co-founder and CEO Year founded: May 1999 Employees: More than 70 Amount of venture funding to date: Not available Business: Sells cars to consumers over the Internet

orget the hassles of negotiating. CarsDirect.com wants to change the car-buying experience and save customers time, money, and aggravation. Founded by former 1-800-Dentist VP of marketing Scott Painter and Idealab head Bill Gross, CarsDirect.com has already sold about 5,000 cars online since its May launch. Painter says the two wanted to alleviate the frustration of choosing and buying a car. "Bill called me up after having a frustrating car-buying experience," Painter says. "He wanted to know how we can do this easier, and cheaper, online. I started work the next day."

CarsDirect.com is the only site that lets customers select the car they want online, buy it electronically, and have it delivered to their home. Dealership network AutoNation Inc. sells 4,000 cars a month online, but it's selling cars already in stock; consumers still have to go to the dealership to get the car. Other sites such as Autobytel.com offer information on automobiles, then refer customers to a nearby dealer.

CarsDirect.com lets customers research, price, design, order, and take delivery of their purchased vehicles. The site includes information on more than 2,500 makes and models. Consumers can look at IntelliChoice consumer reports, vehicle specifications, options, performance and value ratings, safety features, and ownership costs.

To ensure a competitive price, Painter says, the company polled the more than 1,000 dealerships it does business with and devised a bell curve chart of prices for every car CarsDirect.com offers. "We take that bell curve and price the car in the bottom 10th percentile," he says. "We can guarantee that nine times out of 10, a car bought on our site is cheaper than if a consumer went to a regular dealership." There's no negotiation and the price is consistent for all buyers, which removes much of the haggling frustration from the purchasing process.

CarsDirect.com has expanded its offerings to areas such as financing from Bank One's CD1 Financial.com. CD1 will provide buyers with automobile loans, leases, and insurance contracts. In addition, CarsDirect.com last month introduced services that let buyers double or triple their standard warranty terms to 72,000 or 108,000 miles.

The company eventually hopes to go public and has garnered venture-capital investments from Gross himself, Bank One, Foundation Capital, Goldman Sachs, MSD Capital, and Primedia Ventures. By the end of this month, the company says it will have sold more than $172 million worth of cars in six months.

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