By Philippe Reed | NerdWallet
As the pandemic and computer chip shortages continue to upend the auto industry, online used car dealerships are thriving. Sales at the three largest online retailers – Carvana, CarMax and Vroom – were up more than a third year-over-year, according to the three companies’ 2021 fiscal reports.
“These online used-car sellers have revolutionized the used-car market,” says Josh Sadlier, director of content strategy at automotive site Edmunds. “The transparency they give you about the vehicle and the buying process gives you the extra dose of confidence to buy this car.”
Buying a used car online allows shoppers to avoid much of what they hate about the traditional dealership experience, as well as the hassle of out-of-stock items. When you shop online, you know the advertised car is available and you know the price at the door, without having to talk to anyone.
Armed with a little knowledge of the online shopping process, you can focus on your dream car while watching your new favorite show. But when you’re ready to buy, the process requires a different approach than a traditional dealership.
Here’s what to know when browsing this emerging market.
Benefits of online shopping
With more buyers than cars available for sale, taking the online route avoids the car being sold under you before reaching the parking lot. Once you find the right vehicle on the company’s website and post a deposit, the car is yours.
Here are some other benefits of buying online:
More transparency. At dealerships, some charges aren’t revealed until you see the contract. Buying online allows you to see everything, along with a cost breakdown, before committing to the transaction.
No negotiation. Online sellers usually only offer a fixed price for the vehicle you want to buy and your trade-in.
Convenience. You can search for inventories online, set up a loan, and have the car shipped to your home or office, wherever you prefer to sign the paperwork.
Guarantee included. Most of these car sellers include a limited warranty that lasts from seven to 30 days. They will also be happy to sell you an extended warranty at a fixed price.
Disadvantages of shopping online
The biggest problem with remote buying is the inability to take a test drive. With a lot of information and specs online, buyers sometimes think a test drive isn’t necessary. But the real look, feel and feel of a car can only be experienced by driving it yourself.
There are several other disadvantages to buying on the internet:
Only used cars are available. If you want a new car, you have to go through a franchised new car dealership.
Few options for negative equity. Many traditional dealerships will bury negative equity in the new car loan. If you are upside down, meaning you owe more than the value of your car, the dealership will include that amount in your next loan. But with an online transaction, you will have to bring that amount to the table.
You cannot inspect it. Online used car sellers tout their thorough pre-purchase inspection. But, hey, it’s a used car – it’ll get some wear and tear. You can only see the actual condition of the vehicle you purchased once it has been shipped to you.
Limited old inventory. Online car dealerships are not the place to find a $5,000 beater. If you’re on a very limited budget, there are better places to find an affordable car, like your local Craigslist or Facebook Marketplace.
Online car buying tips
With these pros and cons in mind, here’s how to buy these used car sellers online.
Take a test drive before purchasing. Although you can return the car if you don’t like it, it’s still a hassle you want to avoid. Plus, you might be choosing between competing models and need a test drive to make a decision. Consider borrowing a friend’s car, finding a similar car at a dealership to test drive, or renting a car for a longer test drive.
Buy your own loan. These car salespeople offer their own financing, but it’s always a good idea to shop around with multiple lenders for a pre-approved loan. This step will reveal any problems with your credit and give you an idea of the interest rate you will have to pay.
Arrange an inspection. Since you will only have a short window to return the car, you should have it inspected immediately. Start by evaluating the wear yourself. Then take the car to your mechanic for a thorough inspection where they can put the vehicle on a lift and check for any leaks or damage underneath.
Take a test drive after delivery. If you did not test drive before purchase, drive the car as soon as it arrives. Also, make sure it fits in your garage and is big enough to carry all of your commonly needed items. Be aware that you will be limited in the number of kilometers you can drive before returning the car without penalty.
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Philip Reed writes for NerdWallet. E-mail: firstname.lastname@example.org. Twitter: @AutoReed.