The process of buying a car has evolved dramatically in the past decade. While shoppers are still welcome to start (and finish) their buying journey at the closest dealership, it’s no longer a necessity–or even the norm.
Today, the typical shopper starts their purchase online, whether that be researching new cars, perusing inventory, or inquiring about a specific car for sale. Most car purchases still involve working with a car dealer, but when it comes to buying a car online, we can boil the dealership experience down to three common avenues: the traditional online-to-dealership model, a hybrid online-dealership model, and the full online car-buying experience.
The Truth About How to Buy A Car Online
- Traditional Online-to-Dealership Model
- Pros and Cons of the Traditional Online-to-Dealership Model
- Hybrid Online-Dealership Models
- Pros and Cons of the Hybrid Online-Dealership Model
- Full Online Car Buying Experience
- Pros and Cons of Full Online Car Buying
- Comparison of Buying Models
- How to Buy a Car Online: A Step-by-Step Guide
- Limitations and Risks of Buying a Vehicle Fully Online
- Consumer Protections and Considerations
- The Future of Online Car Buying
- Are You Ready to Buy a Car Online?
Traditional Online-to-Dealership Model
First, let’s look at the most familiar and longest-standing option: beginning a purchase online before visiting a dealership to negotiate, test-drive, and transact.
Finding a Car Online
Most car dealerships have their own websites but in addition to these resources, shoppers benefit from various listings marketplaces like CarGurus. Essentially, these websites aggregate inventory from dealerships across the country (and in CarGurus’ case, Canada and the United Kingdom, too). This means that if a shopper is searching for a Honda CR-V, for instance, they can view listings from various dealerships within a set number of miles from their home; delivery options further extend this radius as far as nationwide in some cases.
Research and Comparison
These huge online car-shopping marketplaces have a distinct advantage over individual dealership websites. A dealer’s website is great for browsing inventory at a specific location (and if you know you want to purchase from a specific dealership, they’re a great option), but marketplaces like CarGurus offer the opportunity to comparison shop. With tools like Instant Market Value and vehicle history on display, shoppers can easily compare otherwise similar vehicles.
Contacting the Dealership
In the traditional online-to-dealership model, once a shopper has found the vehicle they’d like to purchase, the next step is to submit an inquiry to the dealership. Generally, this means filling out a simple form with their name, location, email address, and phone number. That inquiry is passed on to the dealership, who will then engage the shopper via email or over the phone.
The In-Person Experience
Most shoppers are best positioned if they negotiate as much of the transaction’s financials via email as possible; show up to the dealership with agreed-upon numbers in hand, and the process should move smoothly and, critically, quickly.
That said, the in-person visit is a necessary step with the online-to-dealership model. For one, it offers the shopper an opportunity to test drive the car. For another, many shoppers will still find opportunity to negotiate on these in-person visits, whether that be with the sales manager or the finance and insurance manager.
Pros and Cons of the Traditional Online-to-Dealership Model
Pros:
- Broad Access to Inventory: Online platforms and dealership websites provide extensive listings, allowing shoppers to explore options locally and nationally.
- Convenient Research Tools: Marketplaces like CarGurus offer tools for price comparisons (e.g., Instant Market Value) and vehicle history checks, simplifying decision-making.
- Comparison Shopping: Shoppers can compare pricing and features across multiple dealerships, enhancing their ability to find the best deal.
- Personal Interaction: In-person visits offer opportunities for test drives and face-to-face negotiations, ensuring a personalized buying experience.
- Pre-Negotiation Benefits: Buyers can handle much of the pricing and financial discussion online, potentially reducing dealership visit times.
- Flexibility in Communication: Contacting dealerships online or over the phone allows buyers to address initial questions or concerns before committing to a visit.
Cons:
- Time-Consuming Process: The need to physically visit a dealership adds time to the car-buying process compared to fully online methods.
- Pressure to Close Deals In-Person: Face-to-face negotiations can sometimes lead to high-pressure sales tactics.
- Limited Online Pricing Clarity: Some dealerships may not provide transparent pricing online, leaving room for unexpected costs during in-person negotiations.
- Geographic Constraints: While delivery options exist, test driving typically requires traveling to the dealership, which may be inconvenient.
- Varied Communication Quality: Responses from dealerships can range in speed and helpfulness, potentially leading to delays or frustration.
- Negotiation Dependency: The in-person aspect often relies on the buyer’s confidence and skill in negotiating, which not all shoppers may have.
Hybrid Online-Dealership Models
There is an ever-increasing push from shoppers to manage more of their vehicle purchase from the comfort of home, and for good reason. With the Covid-19 lockdowns, many businesses adapted to offer better remote services, and consumers quickly grew to appreciate the added convenience. Car sales are no different, and a hybrid online-dealership model allows shoppers to do more from their couch than a traditional online-to-dealership model.
Online Price Negotiations
With the hybrid model, virtually all negotiations are assumed to take place online. This means no trips to the dealership, no time spent sitting around waiting for sales people to “check with their manager” and, in general, more transparency around pricing, fees, and the total out-the-door cost of the vehicle.
Online negotiations don’t stop with the sales price of the vehicle, either. Shoppers who start their purchase online with a hybrid online-dealership model can have their trade-in valued and explore financing, too.
Virtual Showrooms and Video Walkarounds
Cars are expensive. They’re the second-most expensive purchase most shoppers will make, after their home. As such, it’s reasonable that shoppers will want a comprehensive view of any potential purchase. With the traditional online-to-dealership model, this is taken care of during the first visit to the dealer. With the hybrid online-dealership model, more and more businesses are setting up virtual showrooms for their inventory, complete with video walkarounds. This is a great option, as it gives the buyer an opportunity to view every angle of the vehicle from the comfort of their home.
At-Home Test Drives
Finally, dealerships supporting a hybrid online-dealership sales process will often facilitate at-home test drives, wherein a dealership employee will deliver the vehicle the shopper’s home in order for them to evaluate it firsthand. Generally, at-home test drives are available only to shoppers living within a certain number of miles from the selling dealership.
Pros and Cons of the Hybrid Online-Dealership Model
Pros:
- Increased Convenience: Shoppers can handle price negotiations, trade-in valuations, and financing entirely online, reducing the need for dealership visits.
- Time-Saving: Eliminates waiting at dealerships for negotiations or approvals, as everything is handled remotely.
- Enhanced Transparency: Online negotiations often result in clearer pricing and reduced hidden fees compared to in-person discussions.
- Virtual Vehicle Access: Virtual showrooms and video walkarounds provide a comprehensive view of potential purchases, helping buyers make informed decisions from home.
- At-Home Test Drives: Test drive services delivered to the buyer’s home add convenience and flexibility, especially for those living close to the dealership.
- Adapts to Modern Preferences: Aligns with consumer demand for streamlined, remote purchasing processes that emerged during the Covid-19 era.
Cons:
- Limited Geographical Range for Test Drives: At-home test drives are typically available only within a specific distance from the dealership.
- Reduced Face-to-Face Interaction: Some buyers may miss the personal touch of in-person discussions and relationship-building with dealership staff.
- Potential for Miscommunication: Online interactions can sometimes result in misunderstandings or lack of clarity, especially regarding detailed vehicle conditions or terms.
- Dependence on Technology: Buyers need reliable internet access and digital literacy to navigate virtual showrooms and complete the online purchasing process.
- Test Drive Delays: Scheduling at-home test drives may take longer than arranging a visit to the dealership.
- Limited Physical Inspection: Buyers may not feel as confident without physically inspecting the car before making significant decisions.
Full Online Car Buying Experience
Consumer preferences have shifted towards convenience and efficiency, and as a result, a fully online car-buying process has gained significant traction. Shoppers can now handle every step of the transaction—from researching and selecting a vehicle to securing financing and arranging delivery—without ever stepping foot in a dealership. However, while the convenience of buying a car from your couch is hard to beat, there are still some considerations to keep in mind to ensure a smooth purchase.
Vehicle Selection and Virtual Tours
Platforms like Carvana provide comprehensive listings complete with photos, vehicle history reports, and even 360-degree virtual tours. And that’s important: these features are essential for buyers who can’t physically inspect the car.
If you’re considering buying a car fully online, take advantage of any virtual tours and video walkarounds offered. You want to examine the vehicle's condition in detail. Pay close attention to features like the interior, tires, and undercarriage.
Financing and Trade-Ins Online
Just like when buying a car in person, shopping around for a car loan with the best interest rates is a critical step to buying a car entirely online. Many online car-buying platforms offer their own financing and monthly payment calculators, and you can pre-qualify for a loan to speed up the purchasing process. Just like with researching the car, though, you should also shop around for the best financing rates; you can often get better terms by exploring options with your bank or credit union.
If you’re looking to trade in your current vehicle, many online platforms offer instant trade-in quotes. Typically, you'll need to submit details about your car, such as its make, model, mileage, and condition. These online assessments are convenient, but just like with financing, it's worth getting multiple offers to ensure you’re getting the best value.
Home Delivery or Pickup Options
One of the most appealing aspects of buying a car fully online is the ability to have your new vehicle delivered straight to your doorstep. As part of the purchase process, you’ll coordinate a delivery window, or in some cases, you can opt to pick the vehicle up in person (Carvana famously has car “vending machines” for this very purpose).
Return Policies and Guarantees
The uncertainty of purchasing a car sight unseen is mitigated by generous return policies offered by most online car-buying platforms. You can typically expect a 7-day return window, during which you can test drive the car, inspect its condition, and ensure it fits your needs. If you’re not satisfied, you can return the car for a full refund or exchange it for another vehicle. It’s important to note, however, that there are limitations on these return policies. Be sure to read the fine print before proceeding with an all-online purchase.
Pros and Cons of Full Online Car Buying
Pros:
- Convenience: Complete the entire purchase process from home, including financing and trade-ins.
- Time Savings: No need to visit multiple dealerships or engage in lengthy negotiations in person.
- Transparency: Online listings often include detailed vehicle history reports and upfront pricing, which can reduce surprises and hidden fees.
- Return Policies: If you change your mind or if the vehicle doesn’t meet your expectations, you won’t be penalized.
Cons:
- Limited Test-Drive Options: While virtual tours and video walkarounds are helpful, they can’t replace the experience of a real test drive before committing to a purchase.
- Higher Financing Costs: Online car-buying platforms may not always offer the most competitive interest rates, especially for buyers with less-than-perfect credit.
- No Face-to-Face Negotiations: Some buyers appreciate the streamlined nature of online purchasing, but others may miss the ability to haggle and negotiate in person for a better deal.
Comparison of Buying Models
There’s no definitively correct method for buying a car online. Some shoppers will appreciate the in-person element of the traditional model, while those who put a high value on doing as much from home as possible will gravitate toward the hybrid or full-online models.
Generally, shoppers shouldn’t expect dramatic savings with one method over the others, although depending on the buyer, the in-person option may lead to more negotiation. Certainly, the hybrid and full-online models will help shoppers minimize the time spent in a dealership showroom, but much of that time investment will get moved to the front end and the research and outreach stages.
It’s hard to beat the convenience factor of either the hybrid or all-online car-buying methods. The in-person elements of the traditional method still appeal to many more risk-averse buyers, although online-specific benefits like at-home test drives and return policies do plenty to mitigate risk.
How to Buy a Car Online: A Step-by-Step Guide
1. Determine your budget and needs
Before starting an online car search, ask yourself what you need from your next vehicle. Are you looking for a spacious SUV or a fuel-efficient hybrid? Do you want a new car, a used car, or maybe a certified pre-owned car? Knowing the type of vehicle that best suits your lifestyle will narrow down your options.
Further, every smart shopper sets out with a budget. Consider not just the purchase price but also the applicable taxes and fees, plus the total cost of ownership. Factor in expenses like insurance, taxes, registration fees, fuel, maintenance, and potential repairs. If you’re planning to finance, calculate how much you can afford to spend monthly while keeping in mind down payments and interest rates.
Pro Tip: Keep some funds aside for unexpected expenses, especially if you’re buying a used car. Repairs and maintenance can add up, particularly with older vehicles.
2. Research vehicles and prices
Websites like CarGurus, Kelley Blue Book, and Edmunds offer tools to compare prices and features for various vehicles. Use these resources to gain insight into market trends and identify vehicles that fit your budget.
Use the CarGurus Instant Market Value, available on most listings, to see whether a car is priced fairly compared to similar listings. Comparing listings can give you a sense of whether a particular vehicle is priced competitively, which is crucial information for negotiation. You can also use sites like CarGurus to estimate your existing car’s trade-in value.
3. Choose your preferred buying method
There are three main ways to buy a car online:
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Traditional Online-to-Dealership: Start the process online but complete the purchase at a physical dealership.
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Hybrid Model: Handle most of the transaction online, with minimal in-person interaction.
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Full Online Purchase: Complete the entire process from research to delivery, without visiting a dealership.
If you’re someone who values test-driving multiple cars before making a decision, a hybrid approach might be more suitable. Conversely, if you want maximum convenience, platforms like Carvana can facilitate a fully online experience.
4. Secure financing
If you need to arrange financing, many online platforms and dealerships offer their own financing options, but shopping around for the best rates can save you money in the long run. Consider checking with your bank or a credit union, as they often provide competitive loan terms and will offer preapproval.
With CarGurus, you can secure a pre-approved loan, which not only gives you a clear picture of your budget but also strengthens your negotiating position if you’re dealing with a dealership. Be aware that your credit score will significantly impact your interest rate, especially if you’re purchasing a used vehicle. Take the time to check your credit score and address any issues before applying.
If you want to avoid out-of-pocket expenses when buying a car, look for lenders who allow you to include taxes, registration fees, and dealership add-ons like warranties in your loan amount. Just be aware that these added costs will be added to the total amount of the loan, meaning you’ll be paying interest on them, too.
5. Negotiate (if applicable)
While some platforms like Carvana offer fixed prices (albeit often not including sales tax), most dealerships are still open to offers.
If you’re the type to negotiate, leverage your research and use the market value data you gathered earlier to justify your offer. Ask about incentives that may be available. Don’t forget to negotiate fees like dealer documentation fees, delivery charges, or warranties, either. These costs can quickly add up.
6. Complete the purchase
Once you’ve reached an agreement on the price and finalized your financing, it’s time to sign the paperwork. Many dealerships allow you to sign documents electronically, which simplifies the process.
Even if you don’t have a down payment, be prepared to pay a deposit to secure the vehicle. This is typically required to finalize the sale, especially for popular models. If you do have a hefty down payment (or you’re paying for the vehicle outright), the dealership will likely require a bank check, rather than a personal check. Don’t forget that you’ll also need proof of insurance before taking ownership, so arrange this with your provider ahead of time.
7. Arrange delivery or pickup
If you’re working with a traditional online-to-dealership buying model, you’ll likely be picking up the car in person. Treat this as an opportunity for a final inspection to ensure everything is in order before driving home.
Many local dealers (and most fully online platforms) now offer home delivery. Confirm the expected delivery date and inspect the car thoroughly upon arrival.
8. Inspect the vehicle
Look for scratches, dents, or other visible damage that may have occurred during transport. Confirm that all features, such as lights, air conditioning, and infotainment systems, are in working order. If you finalized your purchase in person, make sure the car matches the condition it was in when you performed your initial test drive and closed the deal. If you purchased it 100% online, ensure that it properly matches the seller’s description.
9. Finalize paperwork and registration
Ensure you receive all necessary documents, including the title, bill of sale, and registration forms. Some online platforms and dealerships will handle the registration process for you, while others will provide the paperwork for you to register the car yourself.
Limitations and Risks of Buying a Vehicle Fully Online
Buying a car online can save you precious time, and for many it’s a much less stressful experience than the traditional in-person buying methods, but it is not without its limitations or risks.
Limitations
Unable to physically inspect the vehicle
Although some dealerships offer virtual showrooms, at-home test drives, and video walkarounds, shoppers buying their car online still don’t have a way to physically inspect the vehicle for damage, wear, or mechanical issues in person and prior to engaging virtually with the dealer. Further, as comprehensive as photos and videos can be, they don’t compare with an in-person inspection, and some shoppers may miss subtle problems.
Limited test drive opportunities
Similar to the lack of an in-person inspection, buying online means that shoppers can't assess how the car handles or feels to drive, nor can they check for issues that become apparent only during a drive, until it’s time to schedule an at-home test drive. Test drives are often one of the first steps when buying via the traditional in-person method; with an online purchase, the process is often well underway by the time test driving occurs.
Potential for misrepresentation
Sellers might downplay or omit information about the car's condition, or the photos attached to a listing may be outdated or edited to hide flaws.
Complicated return processes
Even though many dealerships operating with hybrid on fully online sales methods do offer a return policy, if unsatisfied, shoppers trying to return a car may find the process more complex than returning other online purchases. For example, some dealerships may institute various fees or restrictive policies.
Pricing transparency issues
Speaking of fees, shoppers buying online should be sure to read the fine print, as hidden fees or charges might not be apparent until late in the process. Further the online process can limit the opportunity to negotiate, particularly when compared to in-person dealings.
Risks
Fraud risk
There’s a critical difference between buying a car online with a dealership and buying a car online through a peer-to-peer platform. Particularly with peer-to-peer avenues, the potential for scams is present, as is the risk of identity theft if shoppers are sharing personal and financial information online.
Delivery complications
Some online car-buying methods involve the shopper picking up the vehicle at a local dealership, but others include delivery to the shopper’s home. As with any online purchase, there’s potential for damage during transport–the difference between buying a tchotchke on Amazon and a car from an out-of-town dealership, however, is that repairing a damaged vehicle is quite a bit more expensive than replacing most tchotchkes.
Further, delivery means risk of delay. If you need your new vehicle urgently, delayed transportation can prove mightily inconvenient.
Lack of personal relationship with seller
Online tools are great, but for decades, many shoppers built personal relationships with dealership salespeople. This relationship built trust and gave the buyer a level of confidence, and it established a pipeline of repeat customers for the dealership. With online car buying, there’s much less opportunity to build rapport or trust with a salesperson, which may make resolving issues post-purchase more difficult.
Financing challenges
Shopping around for the best price is a valuable exercise with any major purchase, and the same truth applies when acquiring an auto loan. Online financing terms might not be as favorable as other options, and with online car buying methods, shoppers may miss out on those better in-person financing options (or other typically negotiable items).
Title and registration issues
When buying a car, whether online or in person, you’ll need to consider the process and cost of titling and registering your new vehicle. With online car buying, there is the potential for delays or complications in transferring ownership, and a risk of purchasing a car with a lien or other title problems.
Limited opportunity for price negotiation
Buying a car entirely online should be easier than buying one in person, but that doesn’t mean it will be cheaper. Many online platforms offer car deals at set prices, reducing ability to haggle or negotiate on a vehicle’s sale price.
Potential for impulse purchases
Anyone who’s had one too many glasses of wine likely knows the danger of impulsive online shopping. Even if an online car purchase isn’t likely to happen in a matter of a few clicks, the ease of online car shopping might lead to hasty decisions without proper research.
How to Overcome These Limitations and Risks
To be sure, there are a number of limitations and risks associated with buying a car online, whether its done through the traditional online-to-dealership model, a hybrid model, or the transaction is handled fully online. Shoppers looking to minimize these risks or overcome the limitations are best served practicing meticulous due diligence.
First, as with any major purchase, be sure to conduct thorough research and use only reputable platforms–this is a big-ticket item, after all.
Read all terms and conditions carefully before signing (even electronically) any paperwork, and understand the return policies and vehicle warranties.
As with any vehicle purchase, a vehicle history report is a worthy investment, and many dealerships will even include one free of cost. Beyond the vehicle history report, shoppers should inquire about and schedule a pre-purchase inspection from an independent mechanic, particularly when considering a used vehicle. If any issues arise, they can be used as a grounds for negotiation or a reason to walk away from the deal.
Finally, shoppers should be cautious with personal and financial information. Ask the seller if funds are held in escrow and how they secure sensitive information like banking details or social security numbers.
Consumer Protections and Considerations
Beyond the dealerships terms and conditions, including return policies, shoppers should understand their state’s lemon laws and online purchase protections. Additionally, check to see how the vehicle’s warranty (if applicable) is managed. Is it backed by the dealership, the automaker, or a third-party company?
Just like with a traditional car purchase, shoppers will want to check with their insurance company to see how much this purchase will increase monthly (or annual) premiums. This is another area where shopping around can pay dividends.
The Future of Online Car Buying
Vehicle sales have changed dramatically over the past decade, and the way many shoppers purchased their last car will look and feel different from the way they purchase their next car. Emerging technologies like virtual reality or augmented reality showrooms and AI-assisted car-buying services are already reshaping the process to help shoppers find and buy the best car for their needs, and we expect that more and more vehicle purchases will shift toward a full online model in the coming years.
Are You Ready to Buy a Car Online?
There’s no “correct” way to buy a car today. Some shoppers will appreciate the hands-on experience allowed with an online-to-dealership method, some will like the convenience of buying fully online, and others will want a bit of both with the hybrid model. Whether you’re looking to buy a car in person, online, or via a hybrid model, start your next car purchase online with CarGurus.
