How to Buy a Car Online

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The Covid-19 pandemic shifted the way people shop—moving transactions like groceries, day-to-day purchases and cars from in person to online. In fact, in 2020, nearly 30% of Car sales were made online, compared to only 2% before Covid. However, this doesn’t make the purchasing process less risky, so it’s crucial to have a plan to help you buy online successfully.

Follow these four steps to buy a Car online.

1. Set a Budget

Buying a Car is a big investment, so it’s crucial to set a budget beforehand and determine how much car you can afford. Without a budget, you may spend above your means and find yourself with a Car payment you can’t afford.

You can set your Car budget in a few different ways, depending on if you currently:

  • Own a Car. If you already pay for a Car—new or used—use that as a starting point. Decide if you want to keep payments at the same rate or lower, or if you can take on a larger payment, based on your current financial situation. You can also check the value of your current Car online to see whether it might make more sense to sell it privately or trade it in to help lower a new Car payment.
  • Don’t own a Car. Take into account your monthly income, any current payment obligations (rent, mortgage, Credit card bills, etc.) and everyday expenses like groceries to see how much additional cash you have monthly.

Aside from the Car purchase itself, it’s essential to consider ongoing costs as well, like gas, maintenance and Insurance. All of these factor into the total cost of the vehicle.

Related: Auto Loan Calculator

2. Do Your Homework

Once you set a budget, research cars that you can afford that fulfill your needs. For example, if you commute, look for cars with low mileage that get high miles per gallon (MPG); if you have a large family, consider vehicles that comfortably fit everyone, like a van or SUV.

Once you have a few vehicles in mind, compare them side by side. Some manufacturer websites have spec breakdowns online, making it easy to see how they stack up against each other.

Doing your homework gives you a clear idea of the type of Car that’s right for you. It helps you avoid paying more than you can afford or Buying the wrong Car.

3. Get Preapproved for an Auto Loan

The in-person Car Buying process can be a headache: You’ll have to find the Car you want, spend time negotiating the price and then discuss financing options. All of this can take hours or days. However, you can speed up the process if you get preapproved for a Loan and buy a Car online.

When you get preapproved for a Car, a lender reviews your Credit report, which typically requires a hard Credit check that temporarily dings your Credit score, to determine the Loan amount and interest rate you’re likely to receive. This will give you an idea of your down payment and monthly obligation.

Once you have a preapproval letter, you can leverage it by seeing if other dealerships can beat the rate you’re likely to qualify for. If other dealers can’t beat it, you know you have the best rate for your specific situation.

4. Find Your Car Online

You can search online inventory of dealerships nearby or use sites like Vroom, Shift or Carvana. Online-only dealerships are a bit different than traditional lots but have a few commonalities:

  • They all offer one set price, so there’s no haggling involved.
  • They each offer their own financing, but you can still get it elsewhere, like from your bank.
  • They typically have a seven-day test drive window. If you don’t like it, you can return it.
  • Only used cars from other independent sellers are listed.

Carvana and Shift have prequalification options that let you see if you’d qualify for a Loan and what the rate would be without dinging your Credit score. You can compare these to your current preapproval to see which one has the best offer.

You might find the same Car on a few sites, so check the price and any other features that make it stand out.

Buying a Car Online Vs. In Person

Buying a Car online is not for everyone. Compare Buying a Car online vs in person at a dealership to help you determine which is right for you.

Buying a Car online might be a good idea if you:

  • Know what you want. If you have specific needs, like a handicapped-accessible van or an off-roading truck, you might find it online faster. Alongside that, if you find a model online that’s available at a dealership nearby with the same specs, you could use that in your negotiations.
  • Don’t want to test drive cars. One of the biggest factors in Buying a Car is the test drive. Many people have test drove the Car they wanted, only to get out thinking it’s not the one. If you’ve watched enough online videos and read enough reviews, you might not need to do a test drive. Since online dealerships typically have seven-day guarantees, you can try the Car for a week to determine if it’s the one.
  • Want a used Car. Unless you’re Buying a Tesla—where all new cars are sold online—using an online-only dealership means you’re Buying a used Car. All the cars go through the company’s own rigorous inspections and safety standards. For instance, Vroom and Carvana only sell cars that have accident-free CARFAX reports.

Buying a Car in person at a dealership might be a good idea if you:

  • Want a new Car. Online dealerships sell only used cars, besides Tesla. If you want a new Car and don’t want a Tesla, find your nearest dealership.
  • Are just browsing. If you’re only casually looking for a Car—possibly something for the distant future—you can head into a dealership to see what you like.
  • Prefer in-person research. No one can tell you what a Car feels like to you until you get in it. Some might say the interior is cream while others might say it’s white. You might not know how to gauge the size of vehicles without seeing what they look like in front of you. If that’s the case, skip the online Buying and head to a local dealership.

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