Online car buying: What you need to know

Quick notes

-The best way to get a deal on the purchase of your car is to first figure what the manufacturer’s suggested retail price is.

-Online car-buying sites may not be an accurate reflection of the actual market for the car you want to buy.

-Getting a price quote in writing can help you negotiate a better price with other dealerships, based on that written quote.

Online car-buying sites differ depending on the site but are usually sites that either collect car sales advertisements and provide a referral service for the dealership or are kind of like dealerships where you review and complete most of the car purchase online. The car is then test driven at an associated dealership or is brought to the prospective buyer for a test drive.

There are different types of online car selling sites. Many of them act as a more detailed advertising site for a dealership which also allows for the purchase online. The type of online dealership also depends on whether the car is used or new. Used cars can have the greatest room for price negotiation.

Online car sites rely on their breakdowns of market value to show that their pricing is fair. They then try to sell you on the idea that their calculation of market value is fair. The best method to obtain the best deal from online car sites is to price comparison shop and see if the dealer will meet or beat the price.

This can be done in a variety of ways, but Clark’s details the best way to obtain the best price, which is to contact a variety of dealers to let them know what you are interested in, outline your specifications and ask for a detailed invoice within a short time frame. You would then use this detailed invoice to price compare and negotiate with other dealerships.

Online car buying services provide available cars from locations further away and smaller dealerships, so you get a great idea of what’s really out there, which gives you a better opportunity to get the best price possible.

Once you see where the best list price is, see if you can negotiate the price down based on the comparable prices you received from the other dealerships. Online sites that refer out may send you to a dealer that is hungrier for your business and is willing to do more to get the sale. Couple your price comparables with the proper timing, and you will get the best price possible on your car purchase.

Car pricing and invoicing

Knowing the price range and the manufacturer’s suggested price for any upgrades means you will have more wiggle room to negotiate the price, and you will know where the areas of negotiation are. Sometimes you may not be able to get great price reductions, but you may be able to get free added dealer incentives such as free tinting, undercoating, etc….

The market value will fluctuate during the year as will the prices of the cars with the baseline price being set ultimately by the manufacturer. You may be able to get the same car for less, but this would be a result of careful research and a combination of buying at the time, with the right method of payment, at the right dealership location. Online car-buying sites do some of this work for you, but their results can still be biased.

Once you have the manufacturer’s suggested retail price, you can determine what you are willing to pay for the car, and what the market value of the car is generally believed to be. It is also good to understand what the average manufacturer dealer is paying the manufacturer for the car.

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There is an approximate 8% profit margin built into the suggested retail price above what the dealer pays. Knowing what the dealer pays and what the average person is paying for the same car allows you to see the range of discount you may be able to obtain.

Despite what they may tell you, the dealer is unlikely to take a loss on the sale of the vehicle unless the market is in bad shape or the new model year has come out and the dealer needs the space for higher-selling models. Online car buying services provide available cars from locations further away and smaller dealerships, so you get a great idea of what’s really out there, which gives you a better opportunity to get the best price possible.

In order to get the best deal, you should carefully research your chosen car and see if you can obtain an itemized invoice for the exact car you wish to buy. This should be done through the manufacturer’s website, then through some of the other local dealerships and online services.

Once you see where the best list price is, see if you can negotiate the price down based on the comparable prices you received from the other dealerships. Couple your price comparables with the proper timing, and you will get the best price possible on your car purchase.

The same price negotiations are valuable for both brick-and-mortar or online car dealerships or services. Some of the online services do this also, but only from their selected partners. It’s always a good idea to expand your scope a little bit.

A deeper dive — Related reading from the 101:

5 tips for buying your first car | Autos101

Ready to buy your first car but not sure where to start? Check out these great tips for buying your first car.

Do you know when is the best time to buy a car? | Finance101

Knowing the best time to buy a car allows you to have the most room for price negotiation.