We’re used to ordering stuff online and having it show up quickly. But do you want to buy a car that way?
"Everybody’s trying to figure this out right now," says Philip Reed, NerdWallet’s automotive expert. "Because the retail model for selling cars is lagging way behind everything else. I think young people, in general, feel like: 'Why can’t I just buy a car the same way I buy stuff from Amazon or whatever?' And that’s actually slowly happening." But before considering it, you need to know these 12 things.
Why don’t people want to shop at dealerships?
Online sales of cars are being driven by the fact that many people don't like the experience of shopping at a dealership.
"The number-one reason people don't like to walk into a dealership is that they don't like the intimidation factor," says automotive expert Car Coach Lauren Fix.
Some people like the challenge of negotiating, but most people don't. They don't like the confrontation, they don't want to be pressured, and they might not be sure what they want, Fix says.
Of course, more than 80 percent of people research their vehicles online before they buy them. They also weigh in factors like which cars you should buy new—and which you shouldn't. So it only makes sense that consumers who are already checking online might also be interested in buying a car from a virtual dealer. And for those who don't want the hard sell, unlike at a brick-and-mortar dealership, prices from virtual sellers are often already fixed.
What are the benefits of buying a car online?
One thing to keep in mind is that even though virtual dealers are selling cars online, a brick-and-mortar dealership may still be involved with your transaction, especially if you're purchasing a new car. All new car purchases have to be sold through a franchise dealer, Reed says. So even if you buy from the comfort of your home and have the car delivered to you there, the sale will go through a dealer.
With used cars, however, the situation is a little different. Through sites like Carvana, you can search for a used car, apply for financing, consider an extended warranty, and have it delivered to your home.
"In most ways, it replicates the dealership experience, except you’re not in the presence of a salesperson who may be trying to influence your decision," Reed says. "The car is delivered to you, almost like an Amazon package."
In addition, when you buy a used car online, it comes with something dealers don’t typically provide: a return policy, Reed says. Dealerships generally don’t allow returns and no law requires them to accept them.
Another benefit to buying a car from an online dealer? You can make the decision in your home, with tools at your fingertips. In real time you can research the value of the car through resource like Kelley Blue Book and Edmunds.com; use an auto loan calculator; and comparison shop for a good interest rate, Reed notes.
Buying a car from a dealership can also be very time-consuming. "When you actually make a deal, it can easily take six hours at the dealership," Reed says. "You have to negotiate the deal, you test drive, you wait for the finance officer—he sells you all this stuff and there’s waiting in between all of those things. And most people don’t like any of that." Here are some cars you should buy used—and others you shouldn't.
You also don’t know what kind of experience you’re going to have at a dealership. The salesperson could be easygoing, or they could give you the hard sell. If there's more than one they could even gang up on you. "If you say no to one guy, suddenly there’s another guy saying, 'I don’t think you thought about this.'" Reed says. "And they try to wear you down."
In addition, buying from a virtual dealer allows you to draw from a much bigger geographical area. That can be helpful if you’re looking for a hard-to-find car. For example, CarMax, deliver cars to the local lot and you can pick yours up there. Carvana also delivers for free in certain areas.
Also, if you're in the market for a new car, Wheel Wish lets buyers put down a small deposit, then their app will search the country to find your dream car for you, alerting dealers that you might want to buy if they have it in stock. Then you can do all the paperwork at home.
"It’s basically Priceline for cars,” Fix says. Other sites, such as Cargurus and TrueCar, will set you up with a local dealership. The dealer may also offer you a better deal, as they know you're a serious buyer. "They know you’re not there to tire kick," Fix says. "So they can say, 'I can save you another $150.'"
Finally, buying a car from a virtual dealer could save you money. Automotive research firm ISeeCars.com analyzed the listing prices of 12 million used cars. Analysts found that the average used car price of certified pre-owned cars was $2,048 lower from virtual dealerships Carvana, Vroom, and Shift, than the average listing price at traditional dealerships. Sometimes they're padding the price to make your trade-in look better—that's common, and just one of the 34 secrets car dealers don't want you to know.
What are the benefits of buying from a dealership?
All this said, some buyers still prefer to shop in person. Buying a car is a major purchase. You may not want to skip the experience of seeing all the varieties of a certain model in person and taking a test drive.
"Even though I and ten other reviewers might say this car is the best thing since sliced bread, you might get in it and say, 'I hate this, what am I doing?'" Fix says. "The test drive will take away buyer’s remorse."
If you do decide to buy your car from a dealership, the best way to protect yourself from the upsell is by getting a referral and coming armed with a folder full of research you’ve already done. Working with a salesperson can also result in deals, especially at the end of the month, Fix says. And this is the best time of the week to buy a car.
"They’re going to try to fight for your business: 'What can I do, how can I lower the price?'" she says. "Online, you’re not going to get that same interaction." Many dealers also have their own online sales departments, so they will want to be competitive with your online research. The best thing to do is to know what you want—and know yourself—before you head to the dealership. Reed often hears from readers who have gotten in over their heads on cars they can’t afford.
"If you know that you can be convinced into something that really isn’t your thing, then I would say that it makes sense to do it online," Fix says. But the very first thing, know whether buying or leasing a car is the right decision for you.