Is it cheaper to buy your car online, or is it better to stick with a traditional auto dealership? This turns out to be a loaded question, as good deals can be found either way, but they come with trade-offs based on the type of vehicle you want and your willingness to negotiate a cheaper price. Here’s a look at your options.
Traditional car dealership vs. online sites
While the share of vehicles sold online is small (just 10-15%, according to Bloomberg) online vehicle marketplaces like Carvana and Vroom have become more viable, “no-touch” car-buying options during the pandemic. However, traditional dealerships have scrambled to do the same, somewhat blurring the line between the two. Now, both can deliver a vehicle to your door, handle paperwork easily online, provide financing, and offer competitive pricing.
Why you’d buy a car online
Online marketplaces are great if you don’t like dealing with salespeople, want to easily compare prices, or have a specific car model in mind that’s not available in a local dealership, especially if it’s a rare model. It’s also a good option if you’re familiar with the vehicle already and has driven it before, either as a rental or from a test drive at a dealership. (To mitigate the uncertainty of buying a big-ticket item sight-unseen, most online auto merchants offer videos or 360-degree digital images of their cars to help you decide).
Pricing is competitive, too, as there are a lot of companies in the online car selling space—however, the prices you’ll see are pretty much fixed and you likely won’t be able to haggle on the price, unlike at a car dealership.
For even greater savings found online, you have to go beyond established marketplaces and look for deals on secondary reseller markets, like Craigslist or Facebook. With peer-to-peer transactions like these, you lose the middleman and deal directly with the seller, which will save you on commission costs and other markups. The only catch is that you really need to know what you’re doing, as a peer-to-peer sale requires market research, background checks on the vehicle’s history, and paperwork that includes title transfers or a bill of sale (the site Value Penguin has a good overview on buying from a private seller, here). It’s not as scary as it sounds, but you’ll need to do your research to avoid getting ripped off.
Lastly, when purchasing from private sellers you’re more likely to finance the purchase with a car loan obtained separately from a bank, which might offer cheaper rates than you’d see with either a dealership or online site, especially if your credit score isn’t great. And having a pre-approved quote from a bank will give you have more room to haggle on financing with dealerships, too.
Why you’d buy at a dealership
If you’re looking for a new car, you’ll likely need to go through a traditional brick-and-mortar car dealership, as most states have dealership-friendly franchise regulations that entitle them to exclusively sell new car models. That said, these dealers work closely with manufacturers and are therefore able to offer discounts well below the manufacturer’s suggested retail price, or MSRP, especially if a given model isn’t selling (there’s always a crop of new models to sell, which keeps things moving).
Depending on your timing and knowledge of the market, you can negotiate on things like the car price, add-ons, and financing to get a really good deal. Lastly, if you aren’t comfortable buying a car sight-unseen, car dealerships will let you test drive the car, so you’ll know exactly what you’re buying.