As many as 30% of car buyers now make their purchases online. Here's why it makes so much sense.
These days, the best way to purchase a new car might be to skip the dealership and head online.
Just ask Richard Harrel. Last January, the 49-year-old Acworth, Ga., resident started making the rounds at his local dealerships looking for a 2005 Toyota Tacoma. No luck. Dealers either didn't have the model he wanted or offered more bells and whistles than he needed. And the prices were steep, says Harrel.
At his mother's urging, Harrel decided to check out auto Web site CarsDirect.com. He quickly found he could get the truck he wanted, at a very competitive price, with no haggling or high-pressure sales pitch. Within a few weeks, Harrel received an e-mail notifying him that his Tacoma was ready for pickup from a local dealership. "It was one of the same dealers I had already talked to but wouldn't work with me," says Harrel.
Welcome to the new way to kick the tires. According to Edmunds.com, an auto Web site, nearly 30% of automotive transactions are now conducted online. While the advantages might not seem obvious at first, auto experts agree that shoppers can save time and money by going online. Perhaps more important, the entire process is a lot more pleasant: No more wrestling with tough sales teams.
You can purchase new and used cars online. People who've purchased new models say it's remarkably easy. Most sites will forward your request for a free quote to a dealership's Internet sales department. These people make their commissions based on volume rather than price, says Mike Hudson, an automotive expert with Edmunds.com. They understand the importance of offering a fair price to move the sales process along quickly.
"We've walked into a dealership and offered $500 over invoice on a particular car and got laughed off the lot," Hudson says. "We then contacted the Internet manager and got the deal we wanted."
Those looking to purchase a new car online typically field multiple offers at a time — a detail not lost on the dealerships. They know that if they want your business, they'll have to offer you a competitive price. Of course, there's always the opportunity to try to haggle it down even more.
In addition to the sales price, you can work out all the smaller details online as well, including aftermarket products (like rust proofing and extended warranties) and financing. (Auto experts always recommend lining up your financing with an independent lender. Read our story for tips on how to do this.) By arranging everything upfront, you can all but avoid the finance-and-insurance manager. These are the best salespeople in the business, and can squeeze an extra couple of hundred dollars out of almost anyone.
There are also plenty of sites that deal with used cars, which we'll detail below. Ready to give online car buying a spin? Here's how to do it right.
Start Off the Old-Fashioned Way
As glorious as the Internet is, there are some things it can't offer, like a first-hand experience of how a particular model handles. So as soon as you know which model and features you're interested in, go down to your local dealer and kick the tires. Take the car out for a test drive and make sure you love it.
The Price Is Right
Once you've read all the reviews and taken your future car out for a test drive, it's time to research prices. On sites such as Edmunds.com and CarsDirect.com, you can compare the sticker price with the invoice price, and also see if the manufacturer is offering any incentives. Edmunds.com also provides users with what it calls its True Market Value. This is an average price for what other consumers in your area are paying. You shouldn't have to pay more than this. If buying a used car, the industry standard for pricing is Kelley Blue Book.
The Best Sites for New Cars
Each site works a little differently. If you use Edmunds.com or Autobytel.com, local dealers will e-mail you free price quotes. There's no obligation to buy, and consumers should feel free to ask for a lower price. It's going to be tough to get a car for under invoice unless it's last year's model and the dealership needs to unload it to make room for newer vehicles, says Edmunds.com's Hudson.
CarsDirect.com acts more like a broker. It has relationships with dealerships that agree to charge the Web site's low-price guarantee. (If you find a lower price within three days of the sales transaction, CarsDirect will match it.) Even though your purchase is made through a dealer, the entire transaction feels like it's conducted through CarsDirect.com. Most of the company's partner dealerships will even deliver the car to your front door.
If you want to see cars that are actually sitting on lots, go to AutoTrader.com. Here, dealerships list their inventories. This is helpful if you're looking for a quick sale, or if you want to see which vehicles are overstocked in your area (potentially giving you an advantage during negotiations). Just keep in mind that AutoTrader.com only matches buyers with sellers. It's up to you to secure a good price.
If you're feeling a bit sporting, you could always roll the dice and try bidding on a car using eBay Motors. For the savvy, good deals abound. EBay claims to be the largest online automotive marketplace, with one vehicle selling every minute. Just be careful not to get caught-up in the bidding process and wind up overpaying for a car.
The Best Sites for Used Cars
All of the aforementioned sites sell used cars, both from individuals and from dealers. AutoTrader.com and eBay, however, excel in this arena, say experts. The advantage of looking online vs., say, the local newspaper, is that you get to search and compare prices for thousands of cars in your area and can scan multiple pictures that help give a sense of the car's overall condition. And buyers tend to get better prices when they purchase a vehicle online, whether it's from a private individual or a dealership, than they'd get from a dealer's lot, says Michael Rosenberg, senior vice president media and marketing services for Autobytel.com.
Experts recommend limiting your search to vehicles within 20 or 30 miles of your home. This way you can easily test-drive them and get them inspected by a mechanic you trust. It's also crucial that you ask to see service records, and run a vehicle history report from Carfax or Experian. A vehicle history report will tell you if the car has been salvaged, flooded or in an accident.
"There are more and more cases of fraud, including title washing," says Christopher Basso, a spokesman for Carfax. Title washing is the practice of taking a branded flood or salvage vehicle across state lines and getting a new title for it. "If an owner won't hand over the vehicle identification number or other information, walk away. Chances are (he or she) has something to hide."
Finally, don't fixate on getting the absolute lowest price possible. "People who take the time to research a car are often paralyzed by the fear of losing $50," says Edmunds.com's Hudson. "It's not worth your time to fight over $50. (If you shop online) know you can quickly come up with a price that will knock the socks off half the people walking the lots."