New Ways to Buy a Car Online

Consumers have plenty of well-justified gripes about the traditional car-buying process. At car dealerships, prices may be inflated under the assumption that car buyers will haggle with salespeople, a process that often leaves the consumer feeling exhausted and taken advantage of. Pricing can be confusing, too: Buyers might be confronted with a sticker price, invoice price, sales price and Internet price, plus incentives and rebates that they may or may not qualify for.(See our tutorials: The Complete Guide to Buying a New Car and The Complete Guide to Buying a Used Car.)

At no-haggle used-car dealerships, such as CarMax and AutoNation Inc., the pressure may be off, but prices may be higher than Kelley Blue Book’s dealer pricing. Add to that: Dealers of all types have a limited selection.

To help consumers avoid the hassles and potential rip-offs of buying a car in person, a number of companies have cropped up to sell and lease new and used cars online.The road for them hasn't been smooth either.

One such company, Beepi, went out of business early this year despite having raised $150 million from investors and being valued as high as $560 million. But plenty of replacements are coming into the market, each of which offers a slightly different service. Here are three examples that offer a snapshot of what’s available in the for buying cars online. 

Silicon Valley-based Carjojo Corp. doesn’t actually sell cars online, but instead makes it possible for people to buy a new car online at the best price available, then pick it up from a local dealer.  For $199, Carjojo negotiates the price based on algorithms to determine the lowest price a dealer will accept for a particular vehicle given the dealer’s sales patterns, inventory levels and vehicle turnover.

Car buyers who would prefer to negotiate themselves can do so with data provided by Carjojo, including how long the car has been on the dealer’s lot, how much the dealer will earn at Carjojo’s recommended price, how badly the dealer needs your business and how many alternatives are available on the market. The company officially launched in November 2016 and its service is available nationwide.

Deliver My Ride, based in Detroit, Mich., lets car buyers avoid the dealership by filling out an online questionnaire about the type of car they want to buy or lease, the incentives they’re eligible for and the financing they need. The company then anonymously transfers this information to competing car dealerships to get buyers the best price on the vehicle they want while preventing them from being hounded by follow-up marketing calls or dealing with high-pressure sales pitches.

Consumers avoid the time-wasting, hair-pulling process of haggling with a car salesman while he goes back and forth between the buyer and the manager’s office, then waiting around to fill out paperwork after agreeing on a price and fending off upsells while finalizing the transaction.

As its name suggests, Deliver My Ride brings the car to the buyer so he or she never has to set foot in the dealership. Buyers can cancel the transaction if they change their mind before it’s finalized; they can also test drive the car upon delivery before signing the final documents. "If for some reason you do not like the vehicle, the sale will not be completed and we can return to the process and help you find the right car," says the company's website. The company’s founder has 30 years of car dealership experience.

Shift is an online peer-to-peer marketplace that helps consumers sell a car or buy a used one. Shift also helps buyers secure financing if needed or works with the buyer’s preferred lender. The company is based in San Francisco and was founded in 2013. Its service is available in Los Angeles, Orange County, San Diego and San Francisco; there are plans to launch in Washington, D.C.

Shift says sellers are guaranteed a minimum price for their vehicle and buyers save thousands over purchasing through a traditional dealer. The company will bring the car to the buyer for a test drive, and all cars must pass a 200-point inspection and come with a five-day or 200-mile money-back guarantee.

Instead of salespeople, Shift employs “car enthusiasts” who are meant to give buyers honest advice and help them find a car they love while never being pushy or aggressive. Inventory is limited to what car owners are selling, so buyers might not be able to find that Tesla they’ve been coveting.

The company has received financial backing from numerous investors, including DFJ, Highland Capital Partners and Goldman Sachs. As of early 2016, it had raised close to $74 million.

While online car buying can spare consumers the stress of the dealership experience and offer more transparent pricing and the potential to save thousands of dollars, buyers face a number of risks when purchasing a car sight unseen. It might have body or interior damage that wasn’t apparent from the photos or videos available online; more important, it might have undisclosed or unknown mechanical problems. Consumers who try one of these new online car-buying services should find out what guarantees and warranties are available before paying for the vehicle.

Further, these companies are most useful for buyers who already know what car they want to buy since there may be no way to test drive the car until it’s delivered or picked up. As streamlined as the online buying process may be, it’s still a waste of time to buy a car only to find out that you hate driving it.