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If you hate the idea of haggling with a dealer on the price tag to buy a new car, a car-buying service may be a solid alternative for you. You can browse online for cars from the comfort of your own home. And with a car-buying service, you may be able to keep more money in your pocket.
Can car-buying services work for you?
Negotiation at dealerships can be intimidating. If the fear of a bad deal has scared you away from checking out dealer lots, a car-buying service may be a good option for you. There are two main types of car-buying services: concierge services and membership-based services.
Concierge services help you negotiate the price tag of the car and make the car-buying process easier by delivering the car to your home or to a nearby center so you can test drive it before purchasing.
Many organizations — such as AAA, warehouse clubs and credit unions — offer car-buying services to their members free of charge, says John Nielsen, managing director of auto engineering and repair for the AAA national office in Heathrow, Florida. Nielsen says buyers who use these car-buying services can save thousands of dollars on their purchases. “I know somebody who bought a car from our program and saved $2,600,” he says.
Though shoppers have the potential to save a good deal of money, not all car-buying services are alike, says Lauren Fix, founder of The Car Coach and Car Smarts and consumer auto expert. She says consumers need to know what the car-buying service stands to gain from these deals and if their goals are the same as yours.
What you should know about using a car-buying service
If a car-buying service seems right for you, especially if you want to avoid haggling, consider these factors before seeking one out.
1. Companies offer negotiation, convenience
Car-buying platforms are for shoppers who are tight on time and unable to locate and negotiate for a car, explains Fix. For instance, Carvana, a popular car-buying service, offers fixed prices and can bring the car to your home so you can test drive it for seven days.
The cost to use a service varies, and some services may charge a percentage of the cost of the car as a fee.
At Meriwest Credit Union in San Jose, California, for example, members can take advantage of its Autoland car-buying service. Using the service allows them to barely interact with anyone from a dealership, says William Fultz, an auto broker at Meriwest Credit Union. Members are paired with an auto consultant who will negotiate the car’s price on your behalf and work with them on getting a car loan through the credit union.
2. Free services are usually for members only
If you’re a member of AAA, AARP, Costco, Sam’s Club or a credit union, you might be eligible to use their free car-buying services. Each program works differently. Some negotiate for you, while others offer pre-negotiated, fixed prices. These organizations and clubs typically have discounts, additional benefits and incentives that car manufacturers offer exclusively to members.
In order to access these benefits, you need to be a member. AARP costs $16 a year and gives you full access to its membership benefits. Clubs like AAA, Costco and Sam’s Club may require premium membership or have an additional fee for using a car-buying service.
3. Buyers should still do their homework
Before working with a car-buying service, Fix suggests browsing auto research websites, such as Edmunds or Kelley Blue Book, to learn the average sales price for your desired car in your local area.
Buyers should have a good idea of what they want before they contact the service company, Nielsen says. “It’s difficult to help you if you’re looking at minivans, sports cars and convertibles all at the same time,” he says. Consider your lifestyle to find the right car. Factors like budget, commute and frequency of use should guide your choice.
Nielsen suggests narrowing down your search to your top two or three choices, including make, model, color and options, before contacting a car-buying service. “Think about what it is that you truly want to buy and how much you want to spend,” he says.
When a company has that information, it can work much more efficiently at finding the car you want at a competitive price.
4. Understand how car-buying services get paid
While these services might be free for members, the costs are folded into any membership fees. With concierge services, there might be a flat fee or a percentage of the price of the car. Concierges typically charge anywhere from $200 to $1,000, depending on how much of the purchase process they handle.
Car-buying services can often negotiate lower prices with the dealer because of the sales volume the dealership achieves as a result. These savings are passed to the consumer.
Buyers should be aware the company could be steering them to certain dealers they have a business relationship with, Fix says. “You have to ask yourself if you really are getting the best price.”
Fultz says referral fees may not be the only benefit these companies receive. Credit unions often offer car-buying services because they strengthen the customer’s relationship with the financial institution. “It keeps our loans in-house on a much higher basis,” he says. “It benefits us, the membership and the dealers.”
5. Know the return policy
Consumers should make sure they understand the customer satisfaction policy before they take possession of the car or truck, Fix says. Otherwise, you might be stuck with a major purchase and something you aren’t happy with.
You can find the return policy on the car-buying service’s website or by contacting customer service. Besides how many days you have after you purchase the car to return it, check to see if there is a cap on the number of miles you can drive it. If you go over the number of miles, you most likely will need to pay for every mile past the limit.
Typically, the car can’t be returned modified or damaged — it must be in the same condition as when it was delivered to you.
How to choose a car-buying service
Not all companies are created equal. Consider the following questions when comparing options.
- How much help do you want? Varying services provide varying levels of assistance. A car concierge, for example, handles almost all of the buying process, while a membership program will primarily focus on negotiating.
- How much can you afford? When calculating how much you can afford to spend on your new car, make sure to add in the cost of using a service.
- Are you buying new or used? Some services focus on the purchase of new or used vehicles.
If the cost of working with a car-buying service is too steep for your budget, check out car buying apps to help expedite the process.
The bottom line
Using a car-buying service could be a good option for you if you don’t want to negotiate with a salesperson at the dealership, would rather avoid visiting a car lot or are short on time. Before you call, do your homework and look at the details, like researching auto rates, the costs involved and a car-buying platform’s return policy.