Nearly two out of three car buyers use the Internet to shop for vehicles. But of those, less than half contact a dealer over the Web to buy a car. The rest compare vehicles and check options and invoice prices onlineÑthen haggle in the showroom. That could be a big mistake.

Give it a try

The Web offers a low-stress way to get a good deal. Shopping online, you can negotiate prices on your own terms via e-mail rather than do battle on a dealer's turf. And Internet departments usually work on volume, which allows them to reduce the profit on each vehicle. To see how well the Web way works, I shopped for a 2005 Volvo V50 compact wagon at three sites, each of which offers a different method of snaring a good price.

Automotive Web sites that broker with local dealers are the most common. You fill out a brief form online that includes the make and model you're looking for, then the site finds appropriate dealers and alerts the ones you choose.

I picked the service at Kelley Blue Book, which has a network of nearly 18,000 dealers nationwide and doesn't burden you with a lot of questions. You choose up to three dealers in your area and tell them to contact you by e-mail or phone (I chose e-mail). All three dealers I picked got back to me the same day, one within the hour. One sent descriptions and prices of its in-stock Volvo V50s without prompting. Another dealership sent two automated e-mails, but neglected to follow up within four hours as promised. I ran out of patience with the third dealer, whose Internet sales manager kept e-mailing me back with questions about options and colors without offering prices.

Dealer versus dealer

Next, I tried what's called a reverse auction. You tell a Web site what kind of car you want, and dealers offer their best price. The dealers continue to bid and counterbid against one another for a couple of days. When time is up, the dealer with the winning bid gets your contact information.

I used shopping-comparison site PriceGrabber.com, which recently added autos. The process is a little tedious. "Building" your car and answering questions about financing and your trade-in vehicle take a while. I registered on a Monday, and I received an e-mail announcing the close of bidding by 5 p.m. Tuesday. Ten participating dealerships within 50 miles were listed. The e-mail provided the winning bid, along with two other dealers' bids (you're free to pursue those as well). Each offer listed the car's color and options, so it was easy to compare apples with apples.

My last stop was CarsDirect.com, which negotiates prices with local dealerships. CarsDirect negotiates in advance, so it has a list of prices waiting for you. Choosing the car and options was straightforward, and the site also divulged all current rebates and incentives. When you're done building your car, you see the final price. Then you get a call from a CarsDirect "vehicle specialist," who matches you with specific cars at specific dealers. Or, if you love to haggle, you can contact the dealer yourself and try to whittle down the price even more.

Bottom line

Each service came up with fair prices that were within a few hundred dollars of each other. Volvo was offering generous incentives while I was shopping, and dealers were in a price-cutting mood as they made room for the 2006 models. The CarsDirect no-haggle price of $27,550 was the lowest, at about 10% below invoice. The PriceGrabber reverse-auction winner was a close second, at $27,885. The same dealer quoted a price of about a hundred dollars more for the same car via the Kelley Blue Book network.

My advice: Try all three methods. Great hagglers could pare down prices even more; if you still want to negotiate, these Web sites will give you a better starting point.

MORE: Kiplinger.com | Spending Wisely | Cars | Magazine

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