How to buy a used car online

Much of the process has gone digital but you'll still need to kick some tires and do some test drives.

Justin Sullivan via Getty Images

Despite what Dunkin’ Donuts would have you believe, America runs on gasoline. We are a nation of drivers with a transit infrastructure geared overwhelmingly towards automobile travel (with fewer than one percent of those on US roads today being of the electric variety). We’re awash in cars (276 million were registered in the US as of 2020) with around 14 million new light duty trucks and passenger vehicles being sold annually, and nearly three times that amount (around 40 million) in used cars.

Those figures slumped noticeably during the COVID lockdowns in 2020 and 2021, but now that travel restrictions have eased and life returns to a semblance of the old “normal,” demand for vehicles has spiked dramatically since the industry’s massive nosedive in April 2020. Combine that with low supplies of new vehicles due to the ongoing global processor chip shortage, and compounded by rising interest rates brought on by the Russian invasion of Ukraine, the price for used vehicles has skyrocketed.

For used cars up to ten years old, the average price in March stood at $33,653, 40 percent higher than the year before. Newer used cars, those 1 to 3 years old, the average price was $41,000, up 37 percent year-over-year. “With nearly empty new car lots across the country, dealers have been holding prices of newer used cars high,” CoPilot CEO and founder Pat Ryan, told CNBC in April.

People are looking longer for used cars — around 171 days on average, up from 89 before the lockdowns, according to car shopping site, CoPilot — and paying top dollar for what they find. It’s not quite as bad as the new vehicle market where paying over MSRP has become the rule, rather than the exception. Prices for used vehicles have declined slightly in recent months, down 6.4 percent from January, but remain well above the pre-pandemic average.

“It’s potentially becoming a bit deflationary in that regard,” Jonathan Smoke, chief economist at Cox Automotive told CNBC in May, though he doubts it will immediately lead to a strong price correction. “This is not a commodity market that people are speculating, and used vehicles are assets that actually provide utility to folks.”

“We had an unusual circumstance over the last two years that stimulated demand, and we have limited supply,” he said.

Between the stiff competition, a short supply of available autos and a rapidly evolving market that takes place as much online as it does dealer lots, today’s car buyer faces some daunting prospects in their pursuit of a freshly used car. But there are still plenty of deals to be found, you just need to know where and how to look. But first, you need to decide what you’re looking for and how much you’re willing to spend for it.

Figure Out What You Need

What kind of car you need depends on what you plan to do with it. If you’re being unfairly forced back to the office and are looking for a daily commuter, you’re obviously going to want to look more towards smaller hatchbacks and sedans rather than commercial duty pickups — the reverse being true if you own a landscaping business. If you’ve got “$7-a-gallon-doesn’t-phase-me” money, maybe you’re better served commuting in an SUV instead. I don’t know, you do you.

Point is, you want to start with a nebulous idea of what you’ll generally use the vehicle for, then drill down through body type, drivetrain and engine types, into specific makes and models, options and model years until you’ve gotten a solid idea of what you want in a car and which cars will provide that (an excel sheet with all of this information — make, model, years to avoid or specifically look for, average price used, etc — can help you organize the process.) Then you get to take a looooong look at your bank balance and adjust your expectations accordingly.

While you’re doing your initial research, make sure to familiarize yourself with your local consumer protection laws, such as California’s Lemon Law. Doing so will help you spot any seller shenanigans before money changes hands.

isa squiggly line that stays mostly flat until then end then goes up real fast
Cox Automotive

As you can see in the chart above from the March 2022 Manheim Used Vehicle Value Index report, which follows the wholesale price of used vehicle sales, valuations have risen rapidly over the past two years. Before you start actively looking at vehicle listings, take a look around reputable car valuation sites like Kelley Blue Book, Edmunds, Consumer Reports or JD Power’s NADA guide to get a sense of what the vehicles on your list will likely set you back. Similarly, CarFax can provide vehicle history reports indicating a vehicle’s mileage, whether it’s been in any severe accidents, its previous owner and whether it was used in a fleet like a rental car or taxi.

“When dealing with a reputable dealer, you can ask for those kinds of reports,” Todd Ingersoll, CEO and President of Ingersoll Automotive, a GM dealership group out of Danbury, CT, told Engadget. “Another good indicator is what kind of work has the dealership done to the vehicle. So you can and should ask for the repair order of what was done to the car. If it's a reputable store, and they've done great work to get the car up to snuff for sale, they want to put that on display.”

While competition for used cars is currently fierce, prospective buyers have more ways than ever to search for their next vehicle. We’re no longer limited to the selection of whatever the local dealerships and used lots have available. The traditional car buying experience is not going away.

GAITHERSBURG, MARYLAND - APRIL 12:  In an aerial view, a CarMax lot holds hundreds of used cars and trucks on April 12, 2022 in Gaithersburg, Maryland. Consumer prices rose 8.5 percent in the year through March 2022, reaching the fastest inflation rate since 1981 with the U.S. average for a gallon of regular gas peaking at $4.33 on March 11.  (Photo by Chip Somodevilla/Getty Images)
Chip Somodevilla via Getty Images

“Most consumers, when they're buying a very expensive item, they want to see it, they want to put their hands on it, want to drive it,” Ingersoll said, but it has been augmented in recent years by the rise of online listing aggregators like CarGurus, Shift, Autotrader, Vroom, and Carvana as well as hybrid companies like CarMax, which operates both an online showroom and a network of physical car lots throughout the country

Start Your Search Online

The modern car buying process has become a mixture of in-person and online channels, CarMax EVP of Strategy, Marketing and Product, Jim Lyski, told Engadget. Customers are going to “want to do some things in the store, and a retailer can provide a way to allow them to personalize their journey where they can leverage any channel that they want, and those channels are tied together in a really seamless way.”

We can already see evidence of this in the new car market, where online sales made up 30 percent of the total in 2020, up from 2 percent the year before, Alan Haig, president of automotive retail consultant group Haig Partners, told ABC News in 2021. What’s more, a Cox Automotive study from the same period found that customer satisfaction had reached record highs in 2020, with the overall process being more efficient with less time spent in physical dealerships.

Aggregators like Cavana and Vroom pull the vehicle listings of local dealer inventories and assemble them in a centralized, searchable database so you’ll be able to see what’s available both locally and in the wider region. There are going to be a lot more used cars for sale in San Francisco, CA than there will be in Sonora, CA — and there’ll be even more in the Los Angeles metroplex — so if you can’t find what you’re looking for locally, you’re going to need to expand your search area and be prepared to go to where the cars are. These sites are built to do just that. They’re also typically outfitted with handy loan and down payment calculators as well as quotes for the car you already own. You’ll want to check these listings regularly and be ready to make an offer quickly when you find what you’re looking for because the good deals on these sites go fast.

Vehicles are displayed at a Carvana dealership, which allows customers to buy a used car online and have it delivered or pick it up from an automated-tower, in Austin, Texas, U.S., March 9, 2017. Picture taken March 9, 2017. REUTERS/Brian Snyder
Brian Snyder / reuters

But even those don’t list every vehicle for sale in the area. Public boards like Craigslist or NextDoor are a treasure trove of highly affordable used cars that you won’t find on the larger aggregators. Of course, these are going to be private transactions so you’ll want to take the standard precautions. Meet in a public area, insist on a presale mechanic’s inspection, don’t with a big wad of cash and bring your most imposing friend along for “moral” support because seriously, this is Craigslist.

Speak to your family, friends and co-workers as well, as word of mouth is still a great way to find a used car and evaluate a dealership. “We always say the second, third and 12th cars are sold through the service department,” Ingersoll said. “How you take care of people long term, that determines how many people they refer to you.”

Be Sure to Dot Your T's and Cross Your I's

So, once you’ve found the car of your dreams, realized you can’t afford it, lowered your expectations and purchased something more sensible, now comes the paperwork! Depending on what state you live in you’ll have to do more than transfer title. In California for example, the DMV is going to want the bill of sale, vehicle registration, vehicle title and application and a smog certificate. You’ll also have to include the various fees like $15 for title transfer, $58 for the registration, $6 to the air quality management district and another $23 for the California Highway Patrol fee. Check with your state DMV to get a complete list of government fees and instructions for paying them online.

People maintain social distance as they wait in line at the Department of Motor Vehicles (DMV), as the global outbreak of the coronavirus disease (COVID-19) continues, in Santa Monica, California, U.S., May 10, 2021. REUTERS/Lucy Nicholson
Lucy Nicholson / reuters

Dealership fees are another matter. In California, at least, rolling a dealership’s advertising costs into the price of a vehicle is illegal. If you’re buying a car from a dealership, be sure to ask for a comprehensive list of their fees and set about chipping off every extraneous one you can get the salesperson to accept.

So now comes the fun part wherein this reporter, one in desperate need of a car and no patience to wait for the next Maverick model year, puts his money where his keyboard is and attempts to follow his own advice in purchasing a car online. Will he find the 4Runner of his dreams? Will he get ripped off because Craisglist? Stay tuned to Engadget and find out later this summer!

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