News Column

Transforming Online Car Buying

May 4 2000 3:26PM

Hispanic-owned firm develops the "Holy Grail" of auto sites.

By Vaughn Hagerty

Last month, we visited with Ralph Armijo, president and CEO of Colorado-based Navidec, which provides programming and integration services to help companies take the e-commerce plunge. This month, we'll explore how Navidec has taken its expertise and turned it into a Web-based tool for consumers that Forbes magazine says approaches the "Holy Grail of car-buying."

The U.S. consumer new-auto market, estimated to represent $518 billion according to the 1997 U.S. census, is considered by many to be a prime target for conversion to e-commerce, a prospect that many traditional auto dealers see as a threat and some digital entrepreneurs consider a potential gold mine. According to Forrester Research, 470,000 vehicles will be purchased online by 2003. J.D. Power & Associates has reported that 40 percent of U.S. car buyers use the Internet in at least some portion of their buying decision.

Until just a couple of years ago, buying cars had changed little in decades: You could spend weeks researching, locating, and buying your new vehicle. That doesn't even count the time spent securing financing and insurance. Then came the Internet, and things changed. Well, some things. Several big car-buying sites emerged that allowed you to research and compare vehicles even locate the exact vehicle you wanted to purchase. But you still had to work with a salesperson at an auto dealer to complete the sale, and you couldn't get a price quote unless you submitted extensive personal and financial information.

DriveOff.com changes that. Through a variety of partnerships, Mr. Armijo and his company have transferred almost every phase of the transaction from research and selection to financing and price quotes online. You still have to review closing documents, which are delivered via overnight mail along with a draft for the dealer if financing is secured through the site, but the first time customers face a dealer is when they accept their new purchase.

"That is what we would consider a business transformation model," Mr. Armijo explains about the process DriveOff.com encompasses. "Driveoff.com does complete end-to-end solution."

DriveOff.com was launched in the last quarter of 1999, after Navidec had helped construct the Web site of Burt Automotive. "We evolved from there to develop some significant automation called the U.S. Wheels application. We launched that in 14 different markets. We also acquired a couple of automotive Web sites: Leasesource.com and Carwizard.com. We built some other sites, including one for CBScarwizard.com. We took all of those assets that we had in the automotive industry and formed DriveOff.com."

The service was available initially in four test markets Denver, San Francisco, Boston, and Phoenix and was expected to be in more than 40 markets by spring, with a network of 1,200 auto dealers, in part through an exclusive partnership with the Internet Automotive Dealers Marketing Association. Mr. Armijo said he could not release financial results from the test markets, but said "it has gone exceptionally well. It's been very well received."

The concept has attracted the attention of some heavyweight financial backers, including Wells Fargo, which invested $15 million in DriveOff.com and $10 million in its parent company, Navidec. Wells Fargo also signed a multimillion-dollar systems development contract with Navidec.

"Wells Fargo has 1.5 million online banking customers today," Mr. Armijo says. "Now this major auto financing organization will have its own auto-buying service: Wells Fargo Auto-Buying Express, which will be implementing with DriveOff.com. In addition, we had a commitment from First Union Bank of $1 billion a year for financing autos bought off our site.

"We have several other major employers' organizations and insurance companies and other auto-buying organizations that will be using Navidec software branded under their names."

With DriveOff.com apparently rolling toward success, Mr. Armijo says he is turning his sights toward new online opportunities and, potentially, a public offering for DriveOff.com. Four elements are required to develop successful e-commerce-driven Web sites, he says:

Industry knowledge and experience

Personnel

Dollars to finance it

Technology to integrate it.

"With DriveOff.com, we contributed all four of those ourselves. Moving forward, we will contribute one or more of those to other business opportunities. We are helping incubate these companies and helping them go to the public market. An IPO is an objective [for DriveOff.com]."



Source: Hispanic Business Magazine


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