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9 steps to buy a car online

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In the wake of the pandemic, the practice of buying cars online has skyrocketed among Americans. And it’s a development that’s here to stay. As an informed consumer it is important to learn how to find the best car deals when shopping online.

You have easy access to an immense amount of information to help with the online buying process. From the Manufacturer’s Suggested Retail Price (MSRP), trade-in values, financing, incentives, inventory, expert ratings and user reviews — every detail you need is easily found online. Use all of this information to your advantage to be an informed shopper.

1. Set your budget

Your first step should be determining how much you can afford to spend. This includes calculating regular and one-time costs. Fuel, car insurance and your down payment all contribute to the purchase price and ongoing monthly cost associated with owning a car.

Your budget calculations should also take into account the interest you will pay since it is the biggest influence on your monthly payment and the overall cost. Buyers who have higher credit scores will be offered more competitive interest rates than buyers with lower credit scores.

Bankrate tip: Experts advise making at least a 20 percent down payment and spending no more than 10 percent of your monthly household budget on all vehicle expenses, including maintenance and insurance.

2. Get preapproved for a loan

To get the best deal on a car loan, research your options and get preapproved by a lender before approaching any dealerships — online or in person. Banks, credit unions and online lenders offer preapproval periods that allow you to see your potential interest rate and monthly payment so you can shop smartly.

And when you have preapproval, you can use it as leverage when negotiating a deal. Dealer financing involves big markups, so getting a loan online first will help you get the best deal.

“When you’ve agreed on a price, show the dealer your financing and ask if they can beat that rate,” says Matt DeLorenzo, senior managing editor for Kelley Blue Book. “Sometimes dealers have little-known incentives attached to manufacturer-sponsored financing, which could save you money.”

Bankrate tip: By prequalifying for a loan in advance, you’ll know your interest rate, which plays a significant role in how much your monthly payment will be and the total cost over the life of the loan.

3. Find the right car for you

Most people already use the internet to determine what type of car they want and find out as much as possible about the make, model and options. Websites offer expert reviews and articles on hundreds of vehicles, detailing the best vehicles for myriad lifestyles, says CarGurus Deputy Editor Matt Smith.

“And with YouTube, shoppers no longer need to walk the vehicle lot in order to get a good look at cars that interest them,” Smith says. You can do most of your shopping online to cut back on time on the car lot. And in some cases, dealers offer entirely online buying processes, although it may not come with the ability to negotiate price.

Bankrate tip: It can still be a good idea to go see a vehicle in person before signing a sales contract. You can call the dealership and ask a salesperson to take pictures of the vehicle for you, but you should always go for a test drive and mechanic inspection before buying.

4. Research the value of your trade

Knowing the value of your trade and being open to other ways of liquidating your used car can provide more money toward the new car’s purchase price. You can always trade in your car at the dealership, but you should know how much it will sell for before accepting a deal.

Most people search Kelley Blue Book or Edmunds to determine the value of their used cars. In addition, car shopping and research websites like CarGurus use algorithms to determine the expected trade-in value of a car based on characteristics including its age, mileage, location and features.

There are three common ways to sell your used car — and you can do them online, too.

  • Trade in your used vehicle at a dealership, even if you don’t have plans on buying from it. You can also get an offer for your trade-in using the Instant Cash Offer tool on AutoTrader.com, a site for buying and selling new and used cars at participating local dealers.
  • Sell it yourself privately for cash. Search your make and model online for price and availability on private-party sale sites such as eBay and Craigslist.
  • Sell to a used-car dealer such as CarMax or Carvana. Ask for its guaranteed cash price and compare it with what you’ve found online.

Bankrate tip: Don’t just go for the convenience factor and trade in your used car at the dealership where you’ll most likely get the lowest amount for it. Get quotes and use them as negotiation leverage.

5. Check local inventory

When there is a limited supply of the car you want on dealer lots, there is less of a chance you’ll get a great deal, so be sure to check what local dealerships have in stock. Call a variety of dealers to inquire about the availability of the car you have in mind.

But beyond dealerships that may allow you to submit an online application, look for private sales. There are numerous sites that help buyers and sellers connect, and you may be able to find a good deal by skipping the dealer entirely.

You may also want to consider shopping with mixed in-person and online dealers like TrueCar. This way, you can easily browse inventory at both the local and national levels to keep your search broad, especially if you want to buy a specific used model.

Bankrate tip: Look for vehicles with both the VIN (vehicle identification number) in the listing and pictures of the actual vehicle being sold, rather than stock photos.

6. Contact local dealerships for price quotes

Once your online research is complete, contact dealerships for online price quotes. Many dealerships now have departments dedicated to online sales, and whether you email the online sales department or fill out a contact form on the dealer’s website, you should reach someone who has the authority to quote you a price.

“The more quotes you have, the more leverage you’ll have when it comes to sealing the deal,” says Quincy, of Consumer Reports. “But keep in mind that many dealers are going to be reluctant to give you their best price without some certainty that you’re going to buy from them.”

Bankrate tip: Be as specific as you can with make, model and options, and ask several dealerships for their best offers. Compare them with your researched price ranges and one another to determine which is best.

7. Evaluate trade-in value and financing

Once you’ve agreed on a price with a few dealerships, negotiate the trade-in value and financing. Simply ask the dealer for the best offer for your trade.

“Trade-in valuations have skyrocketed in 2020 and 2021. So, if a shopper is in the market for a new car and has a used vehicle to trade in, they should always see how much the dealership is willing to offer,” says Smith, of CarGurus. And prices have continued to increase for used cars, which means you may get an even better deal in 2022.

You can also mention AutoTrader.com’s trade-in value at participating dealerships. Once you receive quotes for your trade, compare them and choose if you’ll accept a dealer’s trade-in offer, sell privately or accept an offer from a used-car dealer, such as CarMax.

Don’t forget to ask about rebates and financing incentives. If you have a voucher or preapproval from your lender, you can mention those because it’s like being a cash buyer — taking financing and the down payment out of the dealer’s profit equation. Ask if the dealer can offer you anything better.

Bankrate tip: If you qualify for 0 percent financing, evaluate any other rebates or incentives before accepting the deal. It may seem like a better offer on the surface, but you may pay less in interest with a third-party lender that charges less fees.

8. Negotiate online

If none of the initial price quotes you receive fall within your range between the fair market value and the invoice price, you can use those two numbers to again ask dealers for their best prices.

“It’s best to ask first what’s the dealer’s best offer. You don’t have to share any details of other offers or negotiations that you’re in with another dealer unless it’s to your advantage,” DeLorenzo says. “Use those figures to ask if the dealer can beat the other deals. If not, remember you are in control and can take your business elsewhere.”

Be sure any price quotes are itemized in an email and remember to ask if any extra fees are withheld or included. Items such as “customer service fees,” options and add-ons — which are negotiable and can be removed — can tack thousands on to your overall price.

If one dealer gives you a price you like, you can email the quote to another dealer to get competing bids, especially if you know exactly what each price quote includes.

Bankrate tip: Never quote your monthly payment budget to a car salesperson. That allows the dealer to pack whatever they can into your quoted payment and still meet your budget. Focus on the overall cost and use it to negotiate for your car.

9. Sign and drive

By now, you should be working with the dealership that has the car you want to buy and that has offered you the best deal. At this stage, you may still have to visit the dealership to finalize the bill of sale, sign any required financing paperwork and pick up your keys and vehicle. But many dealerships are also now delivering cars and paperwork right to your driveway, allowing this final step to be completed at your home.

No matter which approach you take, look over the final contract carefully. Check all of the numbers and ask for explanations of any additional charges or documentation for fees that look questionable. Schedule an appointment with a mechanic to check the car over, even if it’s new — and don’t finalize any paperwork until you are sure your financing and vehicle are what you want.

Bankrate tip: The finance and insurance managers may try to sell you add-ons, but be resolute in saying “no,” and only add something to your car loan if there is no better way to get the service or option.

The bottom line

Buying a car online — or doing most of the legwork online before visiting a dealer — can save you time and money. Check up on current rates, view local and national inventory, compare current vehicle prices and prepare yourself for negotiation. Using the abundance of information available on the internet to your advantage can eliminate much of the stress from getting a new car.

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Written by
Naomi Mannino
Contributing writer
Naomi Mannino is a contributing writer at Bankrate. Naomi writes about loans and banking.
Edited by
Auto loans editor