Using an Online Car Dealer

March 18, 2013

Understand the primary difference between an online car dealership and a physical dealership, as well as 5 key online car dealer facts.

If you are thinking of purchasing a new or used vehicle from an online car dealer, you will find the whole experience is somewhat different than heading down to your local new or used car dealership. This article will cover those differences to give you an idea of the best ways to use an online used car dealership.

What Is an Online Car Dealership?

An online car dealership is an automotive retailer who specializes in selling cars via the Internet. In most cases, an online dealership also has a physical showroom, with online sales serving as a supplement to traditional face-to-face sales. Furthermore, an online car dealership may complete all facets of the transaction, including paperwork, via the Internet or mail, while others merely specialize in listing their cars online while still requiring you to visit to complete the transaction. In either case, an online purchase can be an easy way to find a vehicle that meets your needs. This guide highlights two types of online dealerships: virtual dealerships and physical dealerships.

Virtual Dealerships
Virtual dealerships are those that do business exclusively on the Internet. Although virtual dealerships must maintain a dealer license, they choose to focus on selling only to Internet clients. You may visit the dealership to pick a vehicle up, but oftentimes virtual dealerships have close relationships with shipping companies and can get you a good freight quote. The most common place to find virtual dealerships is via eBay Motors. The low overhead associated with selling via online auctions has attracted many sellers to this medium.

Physical Dealerships
A physical dealership that specializes in online sales likely has dedicated salespeople who work only with Internet prospects. The Internet sales department may be in its own building, or it could share showroom space with other departments and salespeople. Making an online purchase from a physical dealership with a large facility is a very safe bet, as the dealer is likely concerned about their reputation and you should have a very professional dealership experience. In any case, making your next purchase an online one can save you money and time at the dealership.

5 Key Facts about Online Car Dealers

While you won't have salesperson breathing down your neck, there are other ways that online car dealers separate customers from more of their money. In fact, there are quite a few facts and secrets that you should know about purchasing a car online.

You Can Negotiate
When shopping for cars on the Internet, don't be fooled by descriptions such as "Low Internet only pricing" or "Internet specials". The fact is that car dealerships never advertise cars for prices less than they pay for them (unless is just a scam to begin with).

When a dealership sells a vehicle on the Internet, the dealership usually doesn't have to pay a commission to a salesperson. This alone allows some room for discounts and negotiation. So, when contacting an online car dealer about a particular vehicle, don't be afraid to ask for a discount or offer a lower price. If the online dealer tells you the price is set in stone, you can always look for other dealers that offer a similar vehicle.

You Should Arrange Your Own Financing
Sometimes, online car dealers will do their best to get you to use their preferred lender to finance your new or used car purchase. The reason for this is quite simple. The dealership usually earns money by inflating the interest rate charged for the car loan. Or sometimes, the dealership may receive a substantial referral fee from the lender. Just as you can arrange your own financing at your local car dealership, you can do the same when purchasing a vehicle online. Visit local banks or credit unions in your area, or search for online car lenders before finalizing the deal.

You Should Consider Purchase Your Own Warranty
Online car dealers can really apply the pressure when it comes to trying to sell you an extended warranty on a new or used vehicle. In fact, some car dealers may go as far to say that if you don't purchase the warranty now—you won't be able to buy it later. Do not fall for this tactic. There are plenty of online extended warranty companies that will sell you an extended warranty, and you can even purchase mechanical breakdown insurance from car insurance companies that provide protection as well.

You Don't Have to Accept the Dealer Shipping Option
Before you commit to paying the shipping price offered from an online car dealer to have your vehicle transported, make sure you research other shipping companies and search for the best price. While accepting the shipping offer from the dealership may be convenient, it will usually be more expensive. Again, don't let the dealer persuade you into paying too much money for having your car transported.

You Do Still Have to Pay Sales Tax
Some online car dealers will attempt to tell you that you can save a lot of money by purchasing a vehicle from them, because you don't have to pay state sales tax. However, this is simply not true. If your state collects state sales tax, you will usually be required to pay the tax before you can register the vehicle or even get a license plate. So, make sure you include the cost of sales tax and registration when determining the actual cost of the vehicle.

3 Most Popular Online Car Dealerships

Unlike a standard Mazda dealership or Nissan dealership, online sellers do not give you the opportunity to test drive a car in person and examine an individual vehicle prior to buying it. For this reason, it is best to be cautious when purchasing a vehicle from an online car dealership, even if it is highly regarded and popular. As with all of the car dealerships that you interact with, an online car dealership should be properly licensed and certified to sell cars legally. The following sites are some of the most popular online car dealerships.

  • Auto Finder. Auto Finder is one of the most popular online car dealerships in the United States. This site has gained a substantial following for its ability to deliver vehicles quickly and with excellent discounts. With Auto Finder, the discounts are already negotiated with the dealership at the time of purchase. Generally, this means that you as the customer will receive a much better price on your vehicle. However, some people prefer to negotiate dealer discounts themselves; if that is your preference, Auto Finder may not be the best site for you. Still, this site is an easy-to-use stop for a wide selection of inexpensive new cars
  • CarsDirect. CarsDirect has risen to become one of the leading online car sellers. One feature that distinguishes this site from others is the comprehensive online search engine tool, which is one of the best available online at this time. Using the search tool, you can find a car in any location throughout the United States and you can search according to a wide variety of different parameters
  • eBay. eBay is one of the leading internet sale sites for a host of different products, including automobiles. Because it is an auction site, the sales themselves and the quality of the merchandise is not strictly regulated in the same way as a licensed online car dealership. For that reason, purchasing a new car on eBay is a somewhat more risky venture. However, eBay's massive seller community and auction-based pricing strategy give it a significant boost over most other websites in terms of selection and price. You are likely to be able to find any type of vehicle on this site, and you can oftentimes pay much less for a car on eBay than you would at a dealership, provided that you bid wisely during the auction

When visiting an online car dealership site, trust your instincts. If the site appears to be reputable and has received good reviews from a number of customers, continue to shop there. Before making any purchase, however, you'll want to verify the certification for that site in order to best protect your investment.

4 Online Car Warranty Scams to Avoid

You want the assurance that an online car warranty provides, but might be in a hurry to get the paperwork done so that you can get the car home. Are you really aware of what you're getting into? You might not even be aware of the car warranty that you already have. You may start getting calls from telecallers telling you to take up an additional online extended warranty for your car. Before you do that, take the time to learn about common aftermarket auto warranty scams.

  • Telecaller scams. You get an email telling you that your extended warranty or original warranty has expired, and you have to renew it immediately or lose the original protection offered to your car. You may be sent a toll free number to call. Don't reply to these emails and do not call the toll free number. It will have operators who will try to pressure you to buy an extended warranty. They might also try to sell you an aftermarket auto warranty to protect your car. You do not need this protection. Just call your original car dealer and find out when your warranty expires and what you have to do to renew it
  • Fraudulent emails. You get an email saying that your extended warranty bought at the time of purchase will now be activated. You will be asked to send in your credit card number to verify the process. Do not give your credit card number on the telephone. Do not disclose your Vehicle Identification Number, either. Your credit card information and your VIN will contribute to helping hackers carry out identity theft and frauds via your name
  • Great deals if you sign on immediately. The email offers a great deal with almost no cost to you. You're advised to reply back within 24 hours, or the offer is void. Most scam artists will pitch you fast sales to make sure that you sign on as soon as possible. Don't fall for this. Take your time to check the company and its registration. Make sure that the company has no complaints against it in the Better Business Bureau. Make sure that you check out the company with your state Attorney General's Office to rule out the possibility of a scam before signing on
  • Expensive warranty that seems necessary. The cost of the warranty seems expensive, but the seller is guaranteeing that you will need it to protect your car. Extended warranties are a good deal only for high-end cars that have been manufactured abroad. These cars will not have readily available spare parts and it will be difficult to find a qualified technician to service them. If you have a low-end domestic model, don't opt for an expensive extended warranty. These are just not worth it.

Related Questions and Answers

Do I Have to Pay Taxes on a Car that I Buy or Sell Online?

If you decide to buy or sell your vehicle on the Internet, you still have to pay the taxes if you decide to buy the car and do an online sell as well. Many people think that because they purchase or sell their vehicle on the Internet, they do not have to pay taxes on the purchase or the sale. Especially if the car is bought or sold from a different state. This cannot be further from the truth when it comes to buying and selling a car on the Internet. If you do not pay the taxes, you are likely to be fined by the government.

Do Online Car Buying Services Have Added Fees that Traditional Dealerships Don't?

An online car buying service can be both helpful and deceitful if you use the wrong service. There are plenty of Internet car buying services out there that run a reputable business when it comes to selling vehicles. You should look for the following added fees that traditional dealerships do not charge their customers. They show one price on their website and then a higher one on their lot; they offer no haggle prices until you reach the dealership; they quote features and options that are not on the vehicle that is on the lot; and act as middlemen to local dealers.

What are the Fees Associated with Buying Cars on eBay?

There are four types of fees associated with buying cars on eBay. Those four types of fees are, National listing fees, Local listing fees, Parts and Accessories listing fees, and Optional Feature fees. It is completely legal to buy or sell a vehicle using eBay, but it is not as safe as using a dealership or a reputable online vehicle service. Fees, no matter which category they are from, can range from $10-$1,000 depending on the category, the model of the vehicle, the features, the age, and the mileage.

How Much Less Does a Dealership Pay from a Car Manufacturer?

Depending on the vehicle and the circumstances, a dealership pays anywhere between 15 to 20 percent less to receive a vehicle from a manufacturer. For example, if a dealership purchases a Tailgate XYZ from its manufacturer and the price it is charged is roughly $23,000 on a $33,000 vehicle, it means the dealership will likely be marking up the vehicle by 15 to 20 percent to make up its profit. So, using the $23,000 figure, let's suppose that is what the factory charges for a low-level vehicle. This means you have a vehicle that you can sell for about $29,600 and you will still make a nice profit.

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