“Sight unseen.”
Those two words may give you an ulcer when you’re thinking about spending big money on a used car or truck. Surely you should be able to look at, touch, feel, and, of course, drive the potential purchase. But here’s a surprise: Despite the drawbacks of buying a vehicle you haven’t seen up close, today’s online world can still be a safer place to buy a used car or truck than purchases done at a physical dealership.
In many cases, the online world offers better warranties, lower prices, and a more hassle-free car buying and trade-in experience. Unlike the bad old days of online car buying, you’re no longer dealing with an unknown seller on eBay from Hoboken, New Jersey, with an assumed name like “FrankSinatraUsedCarsMyWay,” or a retail dealership that negotiates a price with you online and then throws in a bogus dealer fee once you show up in person.
Today’s leading online sellers, such as Vroom and Carvana, now sell thousands of vehicles a month and will literally bring the car right to your front door at no charge. The prices are haggle-free. You see something you want? You click. You buy. That’s it. (And selling? Two C/D editors recently sold two of their personal cars online through Vroom; read about the experience here.)
The money-back guarantees on offer are incredibly long. If you drive it for seven days and don’t like it, toss back the keys and get your money back. Vroom offers a Worry-Free Warranty that covers everything on the car up to 90 days or 6000 miles. Carvana provides a 100-day, 4189-mile warranty. It’s a big risk to guarantee this much, and customer reviews show that even with such guarantees the buying experience doesn’t always work out. But these guarantees also offer a foundation of faith for those who are willing to buy and test out a car, sight unseen.
They say imitation is the sincerest form of flattery, and if all of these steps at eliminating uncertainty and providing full disclosure sound familiar to you, they should. All these features and assurances are a virtual carbon copy of the benefits CarMax has already offered for well over two decades.
CarMax remains the 800-pound gorilla of the used-car retail market with more than 500,000 vehicles sold in 2016 and $623 million in net profit. The company now has more than 150 locations where potential purchasers can kick the tires in real life before they make a decision on whether to buy. Each CarMax dealership contains hundreds of vehicles that allow you to test drive a variety of vehicles back to back and an equally hassle-free car buying experience.
But the benefits CarMax offers aren’t nearly as, well, beneficial. The retailer’s money-back guarantee is only good for five days, and a 30-day limited warranty that CarMax offers in most states is not nearly as comprehensive as one you might find from an auto dealership. That may or may not be a big deal for you, but as the proverbial market leader, you would think that CarMax would make up for that by offering selling prices that are at least competitive.
So can CarMax beat its online competitors? Here is a sampling of prices on similar models from Carmax and two competitors.
Sometimes, yes. More often than not, no. For right now, it seems Carvana has become the de facto price leader of the three big players. But there’s a geographical catch: almost all of Carvana locations are in the southern half of the United States. That means if you live in a place that has snow and sleet, you may want to see if cheap flights exist, or better yet, figure out the type of used-car shopper you really are.
As an auto auctioneer and owner of my own dealership for nearly 17 years now, I have found that most folks will fall into at least one of these categories:
The Sampler: You test drive everything on earth before making the big decision. You start out thinking you may want a Mazda Miata, but then for some reason, you see a red three-year-old Toyota Camry SE and say, “Hmm . . . maybe I’ll like that! I do like red!” Samplers tend to buy with their eyes. If you like to sample a lot, start off at CarMax, but then do some online comparisons before whipping out that checkbook. Chances are you might even wind up buying the one car that has just the right shade of red, even if it winds up being a minivan.
The Road Tripper: These buyers are an ideal match for online purchasing because they know that a one-way flight and a couple of hotel rooms are the only things separating them from a fun-filled weekend with their next car. So if you ever wanted to take the winding road from Phoenix to Denver in a late-model car of your choice, find your car at the right locale, book a flight, and enjoy the trip.
The Penny Pincher: If $100 in savings is worth an hour-long drive to the next dealership and a three-hour wait while the sales staff “gets the numbers right,” then don’t bother with the traditional dealerships or the online alternatives. Instead go to Autotrader, Craigslist, or eBay. Track the vehicle that interests you, and when the car listing is more than 60 days old (eBay sellers relist vehicles all the time), make an offer that’s a thousand or two less than you might see from a big-three retailer. A lot of dealers wholesale their used inventory after 60 or 90 days. So if your money and time is worth it, count your nickels, go online, and don’t be surprised if the first few answers you get to your lowball offers are “No!” “Get lost!” and “Have you lost your ability to reason?”
The Puritan: You are an open-minded soul who is willing to buy anything—as long as it’s a three-year-old silver Honda Accord EX-L loaded with options and with 35,000 miles on the odometer. No Volkswagen Passats. No Nissan Altimas. No chance in hell of anything but that Honda, and it had better not have more than 35,000 miles or else you want $2000 off the price! You could theoretically buy a Honda online, but even if the price is right, this kind of buyer would still prefer going to a Honda dealer to get a certified pre-owned 2014 Honda Accord EX-L that comes with three free oil changes.
The Trader: You buy a nearly new vehicle, drive it for two to three years, and then find something else that’s nearly new. Usually you are happiest testing cars at places such as a racing school or a rental-car outlet, where you can take a full-day test drive and then see if the vehicle makes you smile. Online car-buying works for this kind of buyer, who tends to end up purchasing his or her number-one choice.
The Waffler: Wafflers turn a small ding on a car into an enormous dent of doubt and an offer on a vehicle into “I know a guy down the street who will sell it for $2000 less. But I really do like your car!” The online world was made for these people. Not to buy, just to shop for eternity. I hope this doesn’t describe you because if it does, you’re probably one of my relatives.
The DIYer: You go to a dealership once to buy, and then never show up again because you can do all the repair and maintenance yourself. You have a very specific idea as to what you want, right down to the options, and you’ll be looking at the vehicle’s condition and history before weighing the price. Since nearly all the cars sold by Vroom, Carvana, and CarMax are bought at dealer auctions you are an ideal neutral shopper, because you know exactly what you want and what to do in the years ahead.
If you think we’re not emphasizing price as much as you would expect, you would be absolutely correct. Here’s why: All of these retailers—both online and traditional brick-and-mortar dealerships—buy the bulk of their vehicles from wholesale dealer auctions, where the highest bidder becomes the new owner. Everyone bids against everyone else, and that means the mom-and-pop dealership has as much access to a good car as CarMax, Vroom, or anyone else with a used-car dealer license.
So look online, browse around for an hour or so, and figure out which type of buyer you really are. Just, please, for the sake of everyone around you, don’t become a penny-pinching waffler.
Steven Lang has been an auto auctioneer, car dealer, and part owner of an auto auction for nearly two decades.
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