Auto pricing services shifting into higher gear online.

Edmunds.com, a leading Web site devoted to shopping for cars, could have been a casualty of the Internet bust had its founder decided to cash in his chips.

Instead, Peter Steinlauf elected to stand pat with his company after listening to presentations by investment bankers who were pitching to take it public. Rather than take on public shareholders, Los Angeles-based Edmunds in 2000 raised about $80 million in private capital from CNET Networks Inc. and a handful of others.

With that capital plus internally generated cash, Edmunds has been working nonstop trying to transform mountains of automotive market data into useful information. That data includes the transaction prices of vehicles at dealerships, adjusted for the myriad trade-ins, discounts and allowances.

Time was, prior to the Internet, that car buyers had precious little information other than the sticker to make an intelligent decision about the second-biggest purchase they ever would undertake, after their homes.

Services and magazines have long existed to provide information such as invoice prices from manufacturers to dealers. Even these numbers were likely insufficient, though, since they mostly couldn't account for available subsidized leases, free optional equipment or cut-rate loans.

Besides, invoice prices didn't really indicate what the market thought a car was worth--only a rough approximation what the dealer paid for it.

Find the price

Now it's possible to find out--with impressive precision if you know how to navigate the Web--exactly what today's current wholesale or retail market price is for, say, a 2003 Chevrolet Malibu in Northern California. Today's price could be different than yesterday's, and different than the price in Maine.

Using related tools, car dealers can determine the exact value of their inventory on a daily basis and, given fluctuating interest rates and prices, figure out whether it's smarter to send vehicles to wholesale auctions or buy more from manufacturers.

Think Wall Street trader, with a portfolio of vehicles rather than stocks, bonds and options.

Edmunds.com said it employs at least six mathematicians with doctorates, as well as numerous software engineers, on a staff of almost 300, to write programs and figure out the algorithms for calculating such numbers as TMV, the "true market value" for new and used vehicles researched on its Web site.

Autobytel Inc., a publicly owned automotive Web site based in Irvine, offers information, as well as quoted prices for new vehicles, organized by ZIP codes. If you want the quotes, you must fill out a form--and the company sells this information to dealers.

According to Jupiter Research in San Francisco, about 3.5 million new-car sales in the U.S. last year, or 21 percent of the total, were influenced by consumers who went on line for vehicle information or price quotes from dealers and then sent a referral request. Jupiter forecasts that this number will increase to 6.1 million by 2009, or about a third of the predicted retail market.

Automakers, realizing that motivated buyers are scanning these Web sites more frequently (and, perhaps, watching TV less frequently), have boosted online advertising budgets. The industry spent about $460 million online in 2004, a sum that should increase to $1.7 billion by 2008, Jupiter said.

Public offering

Autobytel, which had quarterly losses for five years after going public in 1999, posted seven straight quarterly profits before announcing in November that it might have to restate financial results for parts of 2003 and 2004 as a result of possible incorrect accounting. Its market capitalization is about $226 million.

Steinlauf, whose family owns two-thirds of Edmunds.com, says the company would have to be much larger for a public offering to make any sense, given the expense, legal obligations and distractions of operating under shareholder and regulatory scrutiny.

"It's just not time yet," said Ken Levin, executive vice president and general counsel.

Since Edmunds doesn't have to chase quarterly profit goals, it's in a position to take bigger risks developing the expensive software tools meant to impose transparency on that blizzard of data generated by dealers and automakers--data that too often make shopping for cars a mystery.

Edmunds earlier this month introduced Inside Line, an online enthusiasts magazine, meant to attract readers who might be interested in Car and Driver, Automobile or Motor Trend magazines.

If car enthusiasts get so revved up from Inside Line's editorial content that they start shopping for a vehicle using TMV or some other Edmunds software tool, the initiative will be working as planned.

Steinlauf could keep Edmunds a private company for a long time.

Doron Levin is a columnist with Bloomberg News who writes about the automotive industry.