The Ultimate Guide to Online Car Buying: 2022 Edition

 

Online car buying has transformed the way we buy and sell cars today. Here’s how to navigate this new way.

 

 

The internet has revolutionized the car buying process. While you can’t quite buy a Chevy Equinox on Amazon and get it with free two-day shipping, you can do nearly everything else thanks to the power of the internet.

 

 

How does one navigate this new world of online car buying? Where do you go to research what’s available and what will best fit your needs? How do you stay safe and avoid scams? Read on, as we’ll cover it all in this in-depth guide.

 

 

 

 

 

 

Is It Safe to Buy a Car Online?

 

 

Today, more than 70% of Americans shop online. It’s more convenient to do your research and compare what’s available from the comfort of your home instead of a store. That’s also the case when it comes to cars. 

 

 

The internet has been involved in some way in every car purchase I’ve made since I first got online in 1995. Sometimes it was nothing more than spotting a classified ad on a website. Other times it was doing research online, back before websites like Edmunds and Kelley Blue Book got big. In more recent years, I’ve bought and sold numerous cars online without a problem. The scammers are out there, but they’re easy to spot if you know what to look for and how to protect yourself, which we’ll cover in the next section.

 

 

Buying a car online is also a major time saver. According to the “Car Buyer Journey Study, Pandemic Edition” from KBB/Cox Automotive, people previously spent an average of 9 hours and 29 minutes shopping for a new car online in 2019. That time came down to 7 hours and 14 minutes in 2020. The pandemic has encouraged manufacturers and dealers to make it easier to buy a car online to encourage social distancing and reduce the amount of time spent inside a dealership to a minimum.

 

 

Shopping for a car online also eliminates salespeople from the equation until the final stages of the sale, when you’ve already decided what you want and how much you’re willing to spend. There is no room for pushy sales tactics because you already know where to find the next good deal. On average, customers now spend only two hours at a dealer, just to test drive the car and finalize the sale. The vast majority of the work leading up to that point is all done online.

 

 

How To Protect Yourself When Buying a Car Online

 

 

 

 

Of course, we’ve all heard stories or possibly know people who have fallen prey to online scams. While most of us know better than to send money to a fake prince, someone claiming to have a car for sale, collecting your money, then leaving you without your money or the car can happen. Here are some tips from the Better Business Bureau to avoid this fate.

 

 

If It Seems Too Good to Be True, It Probably Is

 

 

You may find the perfect car for sale at an absurdly low price. It’s tempting, but if you start communicating with the “seller,” things can get sketchy pretty quickly. They’ll have you talk to someone else at a different email address, who is selling it on behalf of someone else entirely, for example. Even if they don’t get your money, they could get your personal information before you back out of the deal.

 

 

Don’t Wire Funds Or Complete Bank-to-Bank Transactions

 

 

As soon as the seller starts talking about wire transfers, run the other way. These provide no protection and no way to get your money back in the event of fraud. You can always cancel a check or dispute a charge on your credit card. If you’re handing over cold hard cash, make sure you’ve seen not only the car but all of its documentation first, including the title.

 

 

Contact the Seller By Phone

 

 

The internet is an effective place to try to scam people because it’s impersonal, just words on a screen. Insist on making personal, real-time, phone contact at some point during negotiations. This helps ensure that the seller is legitimately who they say they are. Also, if they are unusually vague about certain details of the sale or cannot confirm their location or the vehicle location, it’s most likely a scam.

 

 

Try Before You Buy

 

 

This is your biggest protection, right here. Insist on actually seeing the car, taking it for a test drive, and even having it inspected by an independent shop before committing to buying it. Scammers will run for the hills at these reasonable demands.

 

 

Don’t Give In To Pressure

 

 

Unscrupulous dealers may try to pressure you into a quick sale. Scammers may try this too, perhaps with a sob story about a family member needing the money immediately for a medical procedure, as a common example. You don’t owe anyone any favors, particularly a stranger who’s trying to sell you a car. Don’t give them any money or personal information until you’re satisfied that the deal is legitimate. Trust your instincts.

 

 

Don’t Trust False Guarantees

 

 

An illegitimate seller may claim that the transaction is guaranteed by eBay, PayPal, Craigslist, or another online marketplace. Don’t believe it. These sites explicitly explain they cannot guarantee that people using their services are legitimate. Anyone who says otherwise is lying.

 

 

Buying a New vs. Used Car Online

 

 

 

 

The process of buying a car online is pretty similar for both new and used cars, but you need to dig a bit deeper in your research when looking into a used car. While a new car has a factory warranty and no previous ownership history, that’s not the case for a used car. 

 

 

See if the previous owner has a Carfax report for the car. This will help you validate the car’s history, how many owners it’s had, whether it’s been in a crash, whether the odometer might have been rolled back, and other information. Keep in mind that Carfax reports, while good, are not always complete. Some dealers and shops add service information to a vehicle’s Carfax reports, while others don’t. That doesn’t mean the service wasn’t done. It’s also possible that a car might have been in a minor crash that doesn’t appear on its Carfax report. It’s still good information, but take it with a grain of salt.

 

 

Ask if the seller has the car’s service history. This would include receipts for any service that has been performed on the car. Simply having this information available is a sign that the seller cared about the car enough to not only service it regularly but keep the service history as proof. 

 

 

The information itself can be useful, too. I once bought a Ford Crown Victoria that started life as a police car. It came with the complete service log from the police department that owned it. From it, I learned that it was an unmarked sergeant’s car, not a regular patrol car. This means it likely wasn’t driven as hard as a car doing regular traffic patrol. In addition, the transmission had been replaced soon before the car left police service. Police use is hard on transmissions, but the replacement transmission hadn’t seen much of that. I knew it would be reliable, and that’s partly why I bought that particular car.

 

 

This is an extreme example, as most of us aren’t buying cars with such colorful histories. But if you’ve done your research on the make and model, know that it has a particular weak point like the transmission, and see that the transmission in the car you’re looking at has been regularly serviced or even replaced, you know that this shouldn’t be a problem for a while. One way to learn about these common issues is with FIXD Premium. Subscribers can use the Issue Forecast feature to see the most likely issues a car may face in the future.

 

 

Steps To Buying a Car Online

 

 

1. Set a Budget

 

 

 

 

It’s not as exciting as test driving new cars (don’t worry, we’ll get to that), but before you do anything else, figure out how much you can afford. The average price of a new car was over $42,000 as of June 2021 and has only increased since then. Some of us may remember when that was the price of a house!

 

 

This isn’t as simple as determining the price of the car or the monthly payment you can afford. Also take into account factors like how much gas you’ll use, and how much insurance will cost. For example, you may get excellent fuel economy with a Honda Civic, which will save money at the pump. But because the Civic is the #1 most stolen car in the US, it may be more expensive to insure than a comparable Hyundai Elantra, making the Hyundai less expensive car overall.

 

 

Car prices are out of control these days, so it’s more important than ever to stay within your means. If you spend too much on a car that won’t be reliable in the long term, you’ll need to pay for repairs in addition to your monthly payment, which could break the bank if you’re not careful. 

 

 

Don’t be afraid to consider a used car instead of a new one. Cars are extremely reliable these days, usually lasting more than 200,000 miles or even a million. The moment a new car drives off a dealer lot, its value depreciates significantly because it isn’t new anymore. Let someone else take that hit so you can get a better deal.

 

 

2. Figure Out Financing In Advance

 

 

Another boring, but important, step to take before you go shopping is to arrange your car loan.

 

 

While dealers will be happy to arrange financing for you, it will often cost more in the long run than having your own. You can certainly go with their financing if they make you an offer you can’t refuse, but by coming in with it already arranged, you have an ironclad reason to not accept their terms if they can’t give you a better deal.

 

 

While the bank will want to know the exact year, make, and model of the car you’re buying before approving your specific loan, you can get preapproved for a certain amount, just like when you’re buying a house. This amount will be based on your income, your down payment, and other factors. To keep your monthly payments low, try to make as big a down payment as you can afford. This will also help you avoid owing more on the car than it’s worth later on.

 

 

3. Find What Works For You

 

 

Now the fun begins. Think about what your transportation needs are, both right now and in the future. For example, if you have no kids but are planning to during the next few years, you might want to skip the two-door coupe. If you live in snow country, all-wheel-drive might be an important feature for you to have.

 

 

All cars, no matter how good they are, have their known weak points, and common failures that take place regularly. Subarus, for example, are known for failing head gaskets. Chrysler minivans have a reputation for failing transmissions, as well as the Honda Odyssey. Even new cars might have some known issues if a particular generation of this car has been out for a few years. (Some people advise you not to buy a car in its first year of production since these issues aren’t known yet.) Find out what these problems are for all of the cars you’re considering.

 

 

While this should be primarily based on your actual needs, it’s okay to include a few wants in there, too. When I bought my Subaru BRZ, I really wanted one in World Rally Blue. There is no practical reason for this at all. I’m just a big fan of Subaru’s successful rally history and wanted this color. The dealer I worked with didn’t have one in stock but got me the last new BRZ in that color available in New England from another dealer. The grey car they did have would’ve worked just as well for me, but I was happier with the blue. Don’t let wants overrule your needs. If no blue car was available, I would’ve taken the grey one. Sometimes, though, you can have it all without breaking the bank.

 

 

 

 

Once you’ve figured out what you need and want from your next car, start researching specific models that match the description. It’s unlikely that you’ll find one that checks off all the boxes, though it’s possible. Keep your budget from step 1 in mind. If you’re shopping for new cars, most manufacturer websites have a “Build Your Own” feature that lets you configure a car exactly how you want it and see how much it would cost. It can be fun to play with, and also a useful tool. 

 

 

In the end, you’ll have a list of specific models that will fit most, if not all of your wants and needs. You may have a preference for one or more of them over the others. This is fine, but be willing to pursue one of your lesser choices if the price makes more sense. If you can’t find any new cars that fit your needs within your budget (an all too familiar situation in 2021), you may have to shop the used car market instead to bring the prices down.

 

 

For each car you’re interested in, research its pricing. Manufacturer and dealer websites will give you the invoice price, which is how much they want to make off the sale. For used cars, that’s the price in the ad. Use websites like Edmunds and KBB to determine the fair market value of the car, and see if they match. Often the seller will be asking more than this. Having this information gives you leverage to negotiate a better price later.

 

 

4. Go Shopping

 

 

This is the real meat and potatoes of the online buying process, where you start finding what’s actually for sale. There are many places to look — dealer websites, Carmax, Carvana, Craigslist, Facebook Marketplace, eBay… We’ll go into more detail about each of these websites later on. For now, simply search for all of the cars on your list of possibilities from step 3, and make a new list of specific examples that you could go buy right now. Include the links in your list for easy reference to pull them up at any time.

 

 

5. Contact the Seller

 

 

 

 

Using whatever means they prefer — phone, text message, email, contact page on the website, etc. — it’s time to contact the sellers of the cars you’re interested in. Ask specific questions, such as when you can look at and test drive the car (more about this in the next section). You can also ask about the common issues of this particular model that you researched in step 3. If you’re considering a Subaru and find one for sale that just had its head gaskets replaced, that one could rate higher on your personal list than another one that’s never had new head gaskets.

 

 

You can also begin to negotiate a price (except for a couple of “no-haggle” options we’ll explore later). 

 

 

Note that it isn’t until now, step 5, that we’re actually speaking to another human being for the first time. Unlike in the past, where visiting a dealer was the beginning of this process, you’re not contacting anyone until you’ve already become an expert on the various models you’re considering, and most importantly how much they should cost. You’ve done enough research to know if a particular car is overpriced, or if the seller isn’t being honest with you about it, or if it’s simply an attempt at a scam. If any of these are the case, walk away. There are other fish in the sea.

 

 

6. Test Drive

 

Here’s where the rubber meets the road. While internet research is great, nothing can replace looking at the actual car you’re interested in for yourself, and driving it to make sure it feels right. Make sure it runs and drives like you would expect it to, with no obvious mechanical problems or issues. Make sure the check engine light isn’t on. If it is, you can use the FIXD scanner and app to find out why it’s on. 

 

 

In fact, even if the light is off, it’s a good idea to plug in FIXD and scan it anyway. It’s possible to reset the light so it will be off during a test drive while problems exist. With the optional Premium subscription, you can also get the optional Premium subscription, which includes a full vehicle history report, the most likely issues this car will have in the future, and you can even get advice from a FIXD mechanic about this vehicle.

 

 

 

 

 

Aside from mechanical issues, it’s also important to make sure that you are comfortable driving it. I simply can not get comfortable driving a Toyota Corolla. Either my arms or my legs can get into a good position, but I’ve never been able to get both comfortable at the same time. There is absolutely nothing wrong with the Corolla, but it seems my particular body proportions simply aren’t right for it. Reasons to reject a car you thought you’d like can be even simpler than that. It could just be too big, or too small.

 

 

Comfort also includes being able to reach and easily operate all of the controls. This isn’t limited to the steering wheel and pedals, but also the infotainment system and climate controls. Some interiors are designed better than others, so play with all the buttons and knobs and figure out what works best for you.

 

 

Try to resist the temptation to buy a car immediately after you test drive it. Drive multiple cars to compare and contrast them, and figure out which one is best for you. It can be tempting to buy on the spot, especially because if you go look at other cars, then decide on this one, it might already be sold. But unless you’re absolutely sure this is the car you want, and the asking price is extremely reasonable, give yourself some time to think about it and try other cars.

 

 

7. Let’s Make a Deal

 

 

You’ve decided what your top choice is, and it’s time to make an offer. Use the fair market price you researched to begin negotiations. Don’t tell a dealer what your monthly payment budget is. This gives them the leverage to give you the payment you want, but perhaps over a longer period of time than you want, or by packing a bunch of extras into the purchase that they now know you can afford.

 

 

Other factors can play into this as well, such as how much a dealer will give you for trading in your old car. In the case of a used car you can, and should, ask to have an independent shop give it a full inspection before you commit to buying it. If the seller won’t allow it, they may have something to hide, so walk away. The act of walking away, in itself, can sometimes convince a seller to do things your way rather than lose the sale.

 

 

8. Sign On the Dotted Line

 

 

 

 

Finally, when you’ve chosen your car and negotiated a deal that both you and the seller are happy with, it’s time to commit. Money changes hands, the seller fills out paperwork, and in the end, you drive away in your new car. All this hard work finally pays off with you owning the car that’s right for you.

 

 

Best Online Car Buying Sites

 

 

There is a seemingly endless number of websites out there to go shopping for cars. Here are the overall features and benefits of some of the biggest ones.

 

 

Local Dealers Websites

 

 

 

 

Pretty much any new car dealer these days has their current inventory of cars available online. If you decide you want a Toyota Tacoma, find a local Toyota dealer’s website and see what they have in stock. Keep in mind that this is just a starting point. If your preferred dealer doesn’t have the exact configuration, option package, or even color that you want, they can trade between other dealers in the area to get it for you.

 

 

You can usually search for both new and used cars in a dealer’s inventory. Independent used car dealers often have an online inventory as well. Even if you end up with or prefer a private sale instead of the dealer experience, knowing how much a dealer is asking for the car you’re interested in is an important piece of information that you should know.

 

 

Craigslist

 

 

 

 

For many years, Craigslist was the preferred way to find a car online, especially used ones. It was free to post an ad, and there were many great deals available here. I’ve found and bought several of them myself.

 

 

More recently, though, scammers have infiltrated Craigslist. A fair number of the ads you see today aren’t for real. Craigslist has started charging to post automotive ads to try and discourage this, but it’s only been somewhat effective. You can still find a good car here. I found my current home on wheels, a Ford camper van, on Craigslist, and I got an excellent deal on it. But you have to be careful and watch out for fake ads.

 

 

Facebook Marketplace

 

 

 

 

With Craigslist falling out of favor, Facebook Marketplace has risen to take its place. It works similarly to Craigslist but is integrated with the rest of the social media platform. One advantage of this is that each ad is tied directly to a known personal or business account rather than the anonymous posts of Craigslist.

 

 

Unfortunately, the scammers are alive and well here, too. It’s very easy to create a fake Facebook account, which counteracts all of the accountability this platform provides over Craigslist.

 

 

eBay

 

 

 

 

You can buy anything on eBay, and cars are no exception. The eBay Motors site has been around for years, offering cars as well as auto parts. Here, too, you can search for specific makes and models in your local area, as well as general categories of vehicles. This might be a good place to do some research to see what options will work for you, as well as actually shopping for cars here.

 

 

One thing to keep in mind is that eBay is traditionally an auction site, not a classified site. That means you may end up bidding on a car instead of buying it outright. Many listings now also have a “Buy It Now” option, which you can click to pay the asking price of the car and bypass the auction if there is one.

 

 

Just because you can buy a car entirely online with eBay doesn’t mean that you should. It’s still important to see the car for yourself, test drive it, and get it inspected by an independent shop unless it’s new (which isn’t likely if it’s being sold on eBay). You can contact the seller before buying or placing a bid to arrange this, but the seller may or may not work with you on that.

 

 

Carmax

 

 

A more recent addition to the automotive sales landscape is Carmax. It operates like an ordinary store rather than a car dealership. They do no-haggle pricing, which can be good if you don’t like playing the negotiation game. The price you see listed is the price you will pay. Another benefit is that they offer all makes and models, and are not limited to just the one or a few that a dealer will specialize in. There is no pressure and none of the typical games you play at a dealer. This is quite appealing to people who genuinely don’t like them.

 

 

Carmax combines this with the benefits of shopping online. You can search for a model on their website, and see not only what’s available at local stores, but also stores farther away. If the right car isn’t available locally, for a fee you can have a car from farther away sent to your local store. You can also opt for curbside delivery, or even having your new car delivered to you without ever stepping inside a store. Once again, you should always see the car for yourself before you commit to buying it. But some people may choose to buy a car based solely on Carmax’s guarantees.

 

 

One unique feature that Carmax pioneered is that they will buy your current car regardless of whether you’re buying a car from them or not. Automotive journalist Doug DeMuro made his name partly by taking ridiculous cars to Carmax to appraise for purchase, such as a Ferrari or a Hummer H1. They’ll consider everything, in any condition, and make you an offer on the spot. At one point I got my Subaru WRX appraised. I only had a short wait at the store while their appraisers determined how much to offer me. That offer is good for seven days, so you can go home and think about it with no pressure to accept it.

 

 

The offer they’ll give you will likely be lower than if you sold the car on the open market. My WRX was no exception, which is why I declined their offer. But on the flip side, they’ll take care of everything for you, including paying off your existing loan. It’s one way to get out of a car in a hurry if you have to.

 

 

Carvana

 

 

 

 

Take away the brick-and-mortar store of Carmax, and you have Carvana, which operates almost entirely online. I say almost because, in a few areas, Carvana operates these unusual vending machines. Instead of dispensing drinks or snacks, they dispense cars. It’s weird.

 

 

For the rest of us, it’s a completely online experience, with your new car being delivered to you after you buy it. Carvana recognizes the importance of being able to evaluate a car in person and offers a seven-day return policy if the car you buy from them doesn’t fit your needs. This is a bit more hassle than the traditional way of test driving several cars and buying the one you want, but some people may prefer the 100% online experience, especially with the safety buffer of their return policy if it doesn’t work out.

 

 

Like Carmax, Carvana will buy your old car whether or not you buy a replacement from them. In 2020, I ended up selling my Subaru WRX to Carvana. Because of the pandemic I wasn’t driving it, and continuing to make payments on a car I wasn’t using just didn’t make sense anymore. The entire transaction took place online over the course of several days. I had to send several pictures of the car, including the odometer, so they could evaluate its condition to make their offer. When I accepted it, they took care of paying off my loan for me. A Carvana representative came to my apartment to take one final look at the car, sign paperwork, and collect the keys. Later that day a truck showed up to take the car away. It was that easy.

 

 

Companies like Carmax and Carvana are changing the game of auto sales. Established dealership networks have refused to actually sell cars online. (Tesla is a notable exception. They also don’t have dealers — they have stores.) Not only are Carmax and Carvana doing what dealers will not, but they are also large enough to have a significant amount of buying power on the used car market, which bites into what’s available for traditional dealers. It will be interesting to see how the market evolves in the future, and whether dealerships evolve toward enabling truly online sales to avoid being left behind.