The Internet has revamped everything from flight booking to personal banking, but somehow the process of buying a new car has been stuck in a time warp. Until now.
Unhaggle.com is Canada's first website dedicated to finding the best new auto prices. Historically, prospective buyers were forced to drive from dealer to dealer to negotiate. Now they can register for a website that forces dealers to bid against each other in an online marketplace. Under this model, the buyer sits in the driver's seat.
The idea was born of out Andrew Tai's frustration with his own car shopping experience. Despite narrowing down his purchase options, from make to colour, Tai still had to spend his nights and weekends visiting dealerships in far flung parts of the Greater Toronto Area.
"I just found the process seemed so inefficient," Tai said.
Seeing a business opportunity, he enlisted the help of two long-time friends. Together they stepped away from their careers in finance and started Unhaggle. "You can go to Auto Trader or Kijiji to help you buy a used car," said co-founder Radek Garbowski, "but for new cars, there really isn't anything out there."
Although the three men admit they're "not auto guys," they don't need to be to make the site useful. "Really, we came to it from a consumer's mindset," Tai said. "What would we as consumers want to use?"
The answer is a simple, easy-to-use website. Potential buyers sign up by paying a $47 registration fee. After that, they enter the year, make and model they're looking for. (The possibilities range from big trucks like Toyota Tacomas to small cars like Volkswagen Golfs.) Using this information and the buyer's postal code, Unhaggle works behind the scenes to pop out a number of deals. If there is a favourable offer, the buyer can pay a deposit of up to $250 to secure the car.
How can buyers be assured they are getting the best price? The dealers have an incentive to offer good deals because competing offers are placed side-by-side on the computer screen.
To get the site right, Unhaggle's co-founders spent a lot of time talking to friends, family and former colleagues. "We found that ... the pain of negotiating with a car dealer was pretty universal," Tai said. From there, they set up a board of advisers comprised of people in the auto industry, who provided suggestions on how to tweak Unhaggle's business model.
Most importantly, the co-founders knew they needed to offer something that didn't already exist in Canada. After some research, they felt assured they were paving their own lane. Although other new car services do exist, they don't help nearly as much in the negotiation process. Car Cost Canada, for instance, provides car buyers with a car's invoice price - or the lowest sale price possible - but it is in the buyer's hands to negotiate. "You're still left doing all the leg work yourself," Garbowski said.
Buyers can also pay auto brokers to help them find a car, but there's no guarantee that brokers are doing an extensive search. Garbowski said brokers typically have a relationship with a few dealers who provide them kickbacks, so the brokers often come back to the buyers with only a few prices to choose from.
Contrarily, Unhaggle removes the middle man and aggregates all of the best prices from its database. There are also no preferred dealers.
However, Unhaggle's business model hinges on signing dealers up. To date, that hasn't been a problem. Unhaggle operates in every major urban centre in Canada. In fact, it says it has heard from dealers who appreciate the service. Not only does the site expose dealers to buyers from other cities and towns, but it allows them to offer cars they can't move off their lots.
When a buyer requests a search, some dealers will have the make, but with a slight modification, such as a different colour. Through Unhaggle these dealers can offer these models up, and provide buyers with an incentive to jump at them by offering a sweet price.
There is no cost for dealers to sign up. They only pay a fee on completed deals, and Unhaggle knows it needs to charge less than brokers to pick up market share.
But the site does have its limitations, such as regions in which dealers hold a monopoly. "If you live in northern Alberta and you're living in a town where there's one Ford dealership for 500 kilometres, then our model doesn't really work," Tai said.
Tim Kiladze