How to Buy a Car Online — from Start to Finish

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Walking onto a car dealership lot can sometimes feel like an experience straight out of a horror movie. Before you’ve even made it a few feet, car salesmen descend upon you like vultures, urging you to make spur-of-the-moment decisions that can bury you in debt up to your eyeballs for the next half-decade.

There has to be a better way. According to a 2015 survey by the research firm Accenture, 53% of people “would consider buying a car online.” And, according to the firm, 16% of people already have.

Buying a car online can be a much smoother experience and lead to better, more well-informed outcomes. But, it does require a bit more legwork on your part (at least digitally). In this guide, we’ll walk you through how the online car buying experience compares with the traditional route and the exact steps you need to know to buy a car online. Finally, we’ll show you what to watch out for to stay safe.

Following the steps in this guide can help ensure that you don’t get taken for a ride when buying your next car online.

Traditional vs. online car buying

Before the internet revolutionized everything, there really was only one way most people bought a car. They’d visit car lots, find a car they liked, and then sit down with a car salesman to work out an agreement. This lead to the dreaded negotiation process.

“There’s all this back-and-forth and, ‘Oh, I’ve got to go talk to my manager,’” said Jack Gillis, director of public affairs at the Consumer Federation of America and author of “The Car Book.” “Well, the guy goes back and has a cup of coffee and lets you sit there and steam for a while, then he comes back and gives you some song and dance about why they can or can’t do something.”

Because most people treated car dealerships as a one-stop shop for buying a car, they often wouldn’t be informed about the full range of available cars, financing options or trade-in options available to them. Without these bargaining chips, consumers are at the mercy of the car salesmen.

“It’s like a lamb being led to slaughter,” said Gillis.

What if someone could wave a magic wand and take away all those painful points? With online car buying, it’s possible to complete nearly every phase of the car-buying experience — from finding the right car to negotiation — entirely online.

In this guide, we’ll talk about the pros and cons of buying a car online and how it compares to traditional car buying.

While removing the painful points of dealing with hawkish car salesmen is certainly nice (especially for introverted folks who have a fear of negotiating), perhaps the biggest benefit of buying a car online is that it puts you in control of the car-buying process.

You’re no longer at the mercy of the salesmen at one dealership. You can expand your options for cars, financing and trade-ins, and use these as bargaining chips to negotiate for the best price possible.

“The whole digital part really is empowering for the buyer because there’s so much information that you can use to make an informed decision,” said Matt DeLorenzo, managing editor of KelleyBlueBook.com.

The downside of all this power is that it requires a bit more digital legwork on your part to bring all the pieces together. But, as we’ll see, it’s not rocket science. Doing your homework can literally save you thousands of dollars and ensure you get the best car possible.

Follow these seven steps to buy cars online

Step 1. Choose the right car

It’s important to choose a type of car that will fit your needs best. Do you want a very fuel-efficient vehicle for short commutes? How about hauling large amounts of cargo around? Do you have a large family, or a small one? Questions like these can help you zero in on what kind of body style (truck? SUV? compact car?) will suit your needs best.

Once you narrow down a body style, it’s time to research what specific makes and models of cars might be best for you. Consumer Reports offers comprehensive reviews of cars by make, model and year, however, it does charge a small monthly or annual fee. Other good websites to do research on specific types of cars include Edmunds, Car and Driver and Kelley Blue Book.

If you’re buying a new car, you might be offered certain options and add-ons from the dealer, such as VIN window etching or rust-proofing. Before you go signing up for every option offered (and sign away your whole paycheck in the process), it’s important to research these options.

According to a 2017 report from the National Consumer Law Center, the average markup on these add-ons is 170%. If you really do need these optional add-ons (and you probably don’t), perhaps it’s better to get it done yourself.

Step 2. Determine the price you want to pay

Next up is determining how much car you can actually afford. A good rule of thumb is the 20/4/10 rule:

  • 20: Make a minimum 20% down payment.
  • 4: Finance for no more than four years.
  • 10: Monthly transportation expenses shouldn’t exceed 10% of your monthly income (including insurance, gas, car payments, etc,)

This rule of thumb will help you set a cap on your car-shopping budget. For example, if you have $3,000 saved, it might be a good idea to avoid buying a car for more than $15,000 ($15,000 * 0.20 down= $3,000). From there, you can assess any financing offers to make sure that you’re not spending more than 10% of your income on the car, and that your financing doesn’t stretch out past the four-year mark.

You can narrow your car search down even further using these budget caps. If you know that the MSRP of a particular new car is far outside of your budget, you can weed it out of consideration. You can use websites like Kelley Blue Book or the National Automobile Dealers Association to research the current prices for new and used cars in your area.

Step 3. Get approved for financing online

Traditionally, you’d walk into a dealership and tell the car salesman your monthly budget. Then, the car salesman would work out the final purchase price and the financing to give you one, final monthly payment number.

According to Gillis, this is one of the surest ways to pay more in the long run.

“The dealer will ask, ‘Listen, what if I can get you out the door for $325 a month?’ [but] you have no idea what you’re really paying for financing,” he said. “You may be getting into a financial arrangement that is more expensive than if you had shopped around.”

That’s why it’s especially important to get preapproved for an auto loan before you actually go shopping. Getting preapproved for a loan does not mean you have to take the financing; rather, it helps you stay within your budget and gives you a bargaining chip in negotiations.

You can easily get preapproved for an auto loan online through websites like LendingTree, which is the parent company of MagnifyMoney. Using our auto loan marketplace, you can fill out one short online form and potentially get offers from several auto lenders at once. It’s also a good idea to check around with local banks and credit unions, which may offer deals to you locally.

You’ll generally need a high credit score to qualify for the best auto financing offers that banks love to advertise. If you don’t have a high credit score, you will still often be preapproved for the loan, however, it may come with higher interest rates. If you’re outright denied for a preapproved loan, you may need to consider shopping elsewhere or waiting a little while so you can take steps to increase your credit score.

If you are qualified for pre-approval, the lender will give you a pre-approval letter. Make sure to keep a copy of this letter, and bring it with you to the table when it comes time to negotiate a price on the car you’ve chosen.

Step 4. Choose the right source

It’s now time to cast your net and see what cars are out there.

AutoTempest is a comprehensive website that proclaims to be the Kayak.com of cars: it searches several websites for specific makes and models, including on Craigslist. If you’re looking for one particular brand, don’t overlook your local dealership’s website. Other possible websites to scope out cars include:

Luckily, with the power of the internet, the whole world (or at least the whole country) can be your virtual car lot. If you’re able to travel to pick up your new vehicle, you might be able to save a trunkful of cash by broadening your search.

For example, if you live in a snowy climate and are looking for an all-wheel drive car, you might try looking in a warmer area. “There might be better incentives on all-wheel drive cars in, say, Arizona than in the Northeast where they got a lot of snow,” said DeLorenzo.

Step 5. Get quotes

Once you’ve identified your targets, the next step is to find out how much they’ll cost. You’ll negotiate the price lower in the next step, but this just sets a starting point.

Oftentimes, dealerships or third-party sellers won’t show you the price of a vehicle online as the price may have changed or the vehicle may have already been sold. That’s why it’s important to contact the dealership directly and ask for a quote for each vehicle you’re interested in.

Email or call the dealership and ask for their internet sales manager: this is the person you’ll be working with through the negotiation process. Give them the VIN or the stock number of the vehicle you’re interested in and ask for a quote. Then, ask them to email it to you so you have it in writing.

It can sometimes be difficult to get a dealership to quote a price. Dealerships may say, “’Oh, I see you’re shopping online, boy that’s great. Here’s what I want you to do. I want you to go and talk to all the other dealers, and then come back to me, and I’ll see what I can do for you.’” said Gillis. “Your response to that is, ‘No, I’m not gonna do that. I want you to give me the very best price you can give me for this make, model, year, and I want you to commit to that.’”

If quote collecting isn’t your thing, you can also hire a service such as CarBargains. For $250 and a detailed description of what you’re looking for, CarBargains staff will collect at least five different dealership quotes for you. According to Gillis, “statistically, about a third of the results actually come in at below so-called manufacturer’s price or inventory price.”

Collecting these quotes gives you the bargaining power you need to negotiate prices as low as possible in the next step.

Step 6. Time to negotiate

Ah, the dreaded negotiation. Since you’ve already gone through all the steps to be an informed consumer, it will be a much smoother process. Specifically, you’ll be negotiating the price of three separate items:

Vehicle price; financing cost; and trade-in value.

Vehicle price

This is the most important piece. You can — and should — play the offers you’ve received in the prior step off of each other. Did someone offer $12,500? Show that emailed quote to another dealer and ask if they can lower their price to $12,000.

Car dealerships are usually very easy to negotiate with online.

“If you think about it from an efficiency point of view, an online salesperson can be working more deals at one time than somebody on the floor who’s physically with one person,” said DeLorenzo. “Sometimes it’s actually more cost-effective for the dealer to sell it through or do a lot of the negotiation online.”

Car salesmen will often try and upsell you on add-ons when negotiating the price for a car. “They may say, ‘Well this will only cost you 10 bucks more a month.’ Well, yeah, and that’s $120 over a year. Over five years that’s $600, $700. You can’t let bells and whistles cloud your judgment,” said DeLorenzo. Stick to the basic numbers and don’t get distracted.

Trade-in price

Chances are that you already have a car you’re looking to trade in and help defray the cost a bit. Most dealerships will accept trade-ins, but be warned: you will probably get much, much less than if you shop around for trade-in prices on your own.

Tools such as Kelley Blue Book also allow you to find out a fair trade-in price for your vehicle. In addition, you can use a tool on their website called “Instant Cash Offer” to get bids from dealers on your car.

“The beauty of having something like that is that it sets a floor for what your car is worth,” said DeLorenzo. “You’ll know you’ll get at least that much in trade or in an outright purchase, and that’s important leverage to have when you’re negotiating a new car deal.”

Additionally, you can try selling your car yourself through websites like Craigslist. Generally, going this route will net you the best price for your old car, although this may take much more time and energy than simply driving onto a car lot with your old car and driving off with a new one.

Financing cost

The final piece of the puzzle is how you’re going to pay for your new car. Since you’ve already taken the time to be preapproved for an auto loan, this step is simple. Show the dealer your pre-approval letter and ask them if they can beat it.

If so, great. If not, then you know you’ve already secured the best auto financing deal possible.

Step 7. Making the final purchase online

Once you’ve lined up the three pieces of the puzzle — the lowest car price, the lowest financing price and the highest trade-in value — it’s time to make your decision.

Most dealerships still require you to physically come in to complete the final paperwork signing. However, that’s beginning to change.

“Savvy dealers are beginning to digitize as much of that kind of paperwork [as possible], to just make it easier to buy a car from them,” said DeLorenzo.

“It works out better for them, too. I mean, if they’re able to get you in and out quicker, they can sell more cars quicker. People have a much more positive view of how the deal went and it’s just good business.”

But as far as completing the entire purchase process online? DeLorenzo said, “I think there are dealers who are willing to do that. The question is, do you want to do that?”

But for now, we still can’t entirely get around some of the physical in-person aspects of buying a car. Perhaps someone will invent a virtual test-drive machine in the future.

Staying safe while shopping for cars online

Luckily, outright scams aren’t too common when it comes to buying cars online, according to Gillis. Many car dealers are subject to consumer-friendly regulation by the Federal Trade Commission.

Beware the bait-and-switch

One situation that Gillis has seen, however, involves a bait-and-switch technique after consumers arrive at the dealership to complete the purchase after negotiating everything online.

Here’s how he describes this common ploy: “You’ve got it all squared away. You get to the dealership to close the deal, and all of a sudden, ‘Oh my gosh. I can’t believe it, someone just came in and bought that car, but we have another one here that actually has a few better features on it, and it’s just the color you wanted, and it’s only gonna cost you $20 more per month.’”

If this happens to you, be prepared to walk away from the dealership — they’re just trying to weasel more money out of you.

While stories like that may be uncommon, there are a couple of things you can do to make sure that you don’t end up regretting your decision.

Get an inspection from an independent mechanic

If you’re buying a used car, whether at a dealer or from someone you found on Craigslist, you should absolutely get an inspection first. Everyone has heard horror stories about buying a lemon (or worse, been the person who bought the faulty car). The seller will surely tell you that the car is in perfect shape, but how do you really know? Getting an auto inspection by an independent mechanic is perhaps one of the best ways to protect yourself.

If you’re unable to take the car to your own mechanic, DeLorenzo recommends a great service from AiM Certify. For as little as $129, you can book an independent mechanic anywhere in the country to travel to the dealership and perform an inspection for you. You’ll get back a full mechanical report complete with actual photos of the car (not gorgeous stock images that seem to plague dealership websites).

Try before you buy

“Most of the problems that consumers end up not liking about their vehicles could have determined in a test drive,” said Gillis. “For example, it’s hard to park, or the back seat really isn’t that comfortable, or the trunk really doesn’t hold that much, or ‘when I’m changing lanes, there’s a big blind spot in the back.’ So that’s why that test drive is really, really important.”

If you’re not happy with your choice, you may have wasted tens of thousands of dollars. “It’s not like buying a pair of shoes from Amazon,” said DeLorenzo. “It gets a little bit more involved if the car doesn’t fit you and you try to send that back.”

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Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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