Leave the dealership behind with online used car dealerships
Want to buy a reliable used car at a good price without hearing that cheesy pitch: “What does it take to get you in this car today?”
Several online car sellers are trying to remove sales lines like this one along with other vulnerabilities that car buyers face. These virtual used car sellers not only leave the dreaded price negotiations behind and shorten the buying process, but also offer lower average prices than stationary dealers, as a current analysis shows.
While car buying experts see some potential risks, they say the future of buying a car may lie in buying a car online.
Price comparison: online vs. on the property
The analysis was carried out by an automotive research company for NerdWallet iSeeCars.comfound that the average used car price among virtual sellers was lower than the average list price among brick and mortar dealers:
$ 2,048 less compared to certified used cars.
$ 202 less compared to uncertified used cars.
That doesn’t mean that online purchases are always cheaper. At traditional retailers, prices are usually negotiable, while online prices are often fixed. A skilled negotiator can get a better deal by visiting a dealer, but it requires navigating a sales experience that most buyers don’t like.
And while only franchise dealers sell certified used vehicles that are backed by the manufacturer, virtual dealers’ vehicles are similar in that they have undergone a full mechanical inspection and are warranted. Online sellers also offer additional benefits such as a return policy and, in some cases, a test drive at your home.
Julie Blackley, communications manager at iSeeCars, said the lower prices at online retailers, as well as these additional benefits, surprised analysts. The study examined the list prices of 12 million used cars in 2018 and compared those sold by brick and mortar dealerships with similar vehicles sold by three virtual car sellers – Carvana, Vroom and Shift – from model years 2012 to 2018.
Old versus new ways to buy a car
The traditional used car buying process involves negotiating the car’s purchase price, trade-in value, and interest rate, says Toby Russell, co-CEO of Shift, which sells cars in most of California and Oregon. Then, he says, before the contract is signed, “they beat you up for two hours trying to sell you extra products that you don’t want or need.”
Shift has fixed prices, offers one Trade-in value for your current vehicle and brings cars to you for a test drive in some areas. This means that a buyer can rate the car while driving on familiar roads in a relaxed environment.
Experts have long said that consumers particularly dislike these aspects of traditional car buying:
Brief test drives in an unfamiliar area with a chatty salesperson.
Complicated negotiations about the selling price of the car, the trade-in value and the loan interest.
A purchase process that can take four to six hours.
No return policy if the buyer doesn’t like the car.
In contrast, buying from virtual retailers offers the following advantages:
Transparent pricing, financing options and pre-trade-in price offers in advance.
In some areas, test drives will be delivered to your home.
A return policy (from five to seven days with limited miles).
Fixed prices for additional warranties, gap insurance, and other products.
Contract signing in a relaxed environment, online or remotely.
The new players
Carvana, Vroom and Shift all offer their own used vehicle financing and provide calculators that customers can use to select loan terms and see a monthly payment. They also have all the return policies and will be doing trade-ins.
Carvana has an inventory of 19,000 cars, according to its website. Buyers can have their purchased car delivered to their door or pick it up from a Carvana machine, a multi-tiered glass tower made of cars.
Vroom has approximately 4,500 cars for sale and delivers cars to customers in the lower 48 states. A company spokesperson said Vroom’s inventory favors high-quality used vehicles with an average price of around $ 30,000.
Shift offers delivered test drives and the assistance of a concierge for car purchases. Most of the 2,000 vehicle inventory comes from people selling their cars to the company rather than cars bought at auctions, Russell says.
A couple of compromises
While the prices and convenience of online shopping are attractive, there could be downsides, says Ron Montoya, executive editor for consumer advice at Edmunds auto website.
Certified used vehicles from a franchise dealer come with manufacturer warranties, which Montoya says may be more extensive than those offered by virtual dealers. It is always a good idea to check what the warranty covers and how long it lasts.
Similarly, Montoya recommends buyers for both brick and mortar and virtual dealers to determine the current market value of a used car from an independent source.
He also says that buying a used car is a “touch and feel” process and a decision based only on pictures may not produce the best result for consumers.
Still, Montoya and Blackley agree that online sales could be the wave of the future. Montoya says, “The fact that you can automate the deal online – that’s the goal and that’s where we’re going.”