Internet startups such as iMotors.com Inc. in San Francisco think they are going to reduce those profit margins. It sells 1-to 5-year-old used cars and provides a guaranteed price and an immediate purchase contract when a used car is requested, even before finding the make and model sought by a customer.

IMotors.com operates a nationwide network of auto brokers who track down used cars from financing companies with previously leased vehicles, wholesale auctions, individuals, and even dealerships. After finding a requested car, the company inspects and cleans the vehicle and repairs any problems. IMotors provides a three-month/3,000-mile warranty and gives customers a seven-day or 700-mile test-drive period during which they can return the car for any reason.

Beth VanStory, president of iMotors.com, says addressing consumers' fears is the most important challenge to selling used cars online. "When you're buying a product that costs as much as a car, sight unseen, customers are going to have high expectations," she says.

The site uses Intel-based PCs running Microsoft Windows NT 4.0 and Internet Information Server. To deploy quickly last September, VanStory says the site was built with the ColdFusion Internet site development and deployment environment from Allaire Corp. But the company is re-architecting the site with WebLogic Enterprise application server from BEA Systems Inc. WebLogic provides more personalization capabilities, and also uses a component-based architecture that will help the company easily reuse site elements, such as payment calculators, she says. IMotors hired Exodus Communications Inc. to host the site.

VanStory says her company has a major advantage over its main competitors--dealerships--because it doesn't have to carry inventory or pay for other overhead, such as real estate and salespeople.

Like many Internet car sellers, iMotors only serves certain markets. It only sells used cars in the major markets on the West Coast, but will begin selling in some East Coast markets in May 2001. VanStory wouldn't provide sales figures, except to say that March car deliveries increased 35% from the previous month.

Like most new-car Web sites, iMotors has put a lot of effort into creating effective interactive shopping tools. The company recruited leading statistical experts and spent more than a year and a half designing "highly proprietary" technology that is used for estimating a price with the proper profit margin for a used car. VanStory would not provide details on the technologies used to create the tool.

But traditional dealerships are also learning about selling used cars on the Internet. JM Lexus in Margate, Fla., started selling used cars on eBay Inc.'s auction site at the beginning of the year and now moves 15 to 20 cars a month this way, accounting for about two-thirds of its total used car sales. "Sometimes we get unbelievable prices," says Michael Knapton, Internet coordinator for the dealership. "I guess people just get caught up in auction fever."

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