In this video I discuss online car buying and the premium that people pay for buying a car online. Using the examples of a Toyota Corolla, Honda CR-V (SUV), and Ford F-150 pickup truck I compare costs of vehicles with the same year, mileage, equipment, and condition to the lowest dealership listings via Car Gurus and the best online car buying sites (Carvana, CarMax, and Vroom).
Buying a car online is a commitment to pay more for a vehicle. Presence is buyer leverage. Ultimately sellers are always willing to give the bigger discount at the end of the day to the person standing in front of them (as opposed to the emails in their inbox). As an online buyer you forfeit this leverage, but that doesn’t mean you have to forgo the most popular car buying sites all together.
The worst thing that can happen in the car buying process is not that you overpay. The worst thing that can happen is you buy the wrong car. No matter where your search takes you, make sure you start with clarity and focus on the goal you’re trying to complete with this next car purchase.
These car buying sites can bring tremendous value to the car buyer who wants a streamlined purchase and financing solution from the comfort of their home and the option to have the car delivered right to their door. For some this convenience is worth all or more of the added costs.
In the table below I’ve compiled the results of a search I performed this week for the vehicles I mentioned in the opening paragraph. I wanted to see how the prices compared across the most popular car buying websites. I started by looking up the current car dealer trade-in value to estimate what a dealer might have to pay to acquire the car. I used Kelley Blue Book to figure out what the cars are worth simply because that is the service we used at the Mercedes-Benz dealership I used to work for. Other alternatives dealers might use to determine wholesale price include BlackBook or NADA guides (NADA Guides vs. BlackBook Values).
As a general rule of thumb typically a dealership is going to list a car or truck for $5,000-$7,000 more than they paid to take the vehicle in on trade or from an auto auction. From that initial list price they’re typically going to be willing to negotiate down to the point where they’re making $1,500-$3,000 gross profit on the sale price. I used these trade in values just to provide context for how much deals and the online car buying sites might be making on the revenue of a sale. If you want to know more about how to best negotiate price at the dealership I cover everything car negotiation on this site as well as my YouTube channel.
I then went to cargurus.com to check for the lowest priced listings for the same year, model, mileage, equipment, and condition across the nation. The lowest listings were within $1,000 to $4,500 of the estimated Kelley Blue Book dealer trade-in value in most states.
With a list of these cars would cost at the dealership I then went to the online car buying sites (Carvana, CarMax, and Vroom) to see how they would compare.
The results are straightforward. You will be paying more to buy a car online. These car buying sites appear to have already begun to compete amongst themselves on price, but still charge thousands more than the comparables found at local car dealers.
Caravana charges the highest premium above the lowest dealer listings in this limited search ($2,500 to $4,500). While Carvana does have physical locations for pick up in addition to their home delivery offering, perhaps they can’t compete as directly with the larger national reach of CarMax dealerships. With lower vehicle prices, CarMax also appears to offer significantly more free delivery scenarios than Carvana with their established dealer network. The CarMax premium of $2,000 to $3,500 is still higher than the smaller of the three platforms, Vroom. With the lowest inventory of the three, Vroom appears to be the cheapest online car buying site, and perhaps the reason they’re willing to compete for the lowest price.
How to Best Negotiate at the Dealership
I’ve helped thousands of YouTubers save money and time on their next vehicle purchase with the Car Buying Tips, Personal Finance, and Investment advice on my YouTube channel and here on notwaitingtolive.com/car-blog.
This is one of the best online car buying sites around because I make negotiating the best results simple for people of all walks of life.
Use these tips to have the confidence to represent yourself in a car negotiation. Don’t let car dealers rip you off with their tricks of the trade. These are some the videos car buyers find most helpful:
How to best negotiate used car price: https://youtu.be/zgT_4khybEw
How to best negotiate a lease: https://youtu.be/ImT61XQf3VQ
How to best negotiate new car price: https://youtu.be/BHgwd6YKWlU
What to look for when buying a used car: https://youtu.be/OoigZf6fFuI
How to negotiate a car deal by email: https://youtu.be/pJxjHpcPQdM
How to make lowest initial offer on a used car: https://youtu.be/ozkOrmz_8lw
Cash buyers pay more at car dealerships (what to say to save money): https://youtu.be/uc2W0oBdTU0