Used car shopping never seems to be easy. By the time you are done, it may not seem like very much fun either. The worst part is overpaying for a used car at a dealership or trying to haggle with a private seller who has somehow factored their sentimental value into the price the vehicle. It doesn’t matter if you need a car today or are just starting the car buying process; it is well worth your time to consider buying used cars online to save a bundle.
Why Are Used Cars Cheaper Online?
The big question everyone is asking is why buying cars online would be any less expensive than a dealership or private seller located nearby. There are several factors which affect car prices and shopping online gives you much more control over them.
1. Lower Overhead
One of the primary reasons buying used cars online, especially through online auto auctions, can save you money is because there is less overhead. More used car “dealers” are now operating without a sales team or a traditional physical location. This has allowed them to significantly slash their overhead costs. Lower fixed costs means they can sell their cars for less while still generating a profit. In this situation, you both win. They make enough money to cover their costs and net a profit while you pay significantly less than you normally would.
If you are using an online auto auction website then the overhead costs are reduced even further. This is because auto auction websites don’t pay for the vehicles they are auctioning off which means they don’t really care how much you pay for it. They are getting a commission regardless and the only major overhead they have is vehicle storage and website protection/maintenance. A majority of these costs are covered with the “buyer’s premium”. This is a set fee that exists at every auction, both live and online. Normally it will range from 5% to 15%. Other online auto auction sites will charge a small membership fee which helps reduce the buyer’s premium rate and actually helps you save money in the long run.
2. Limited or Non-Existent Sales Commission
In order for a dealership to make money, they not only have to cover all of their overhead costs but they also have to pay a commission to their sales team. Normally, the commission is a percentage of the final sale profits – not the final sale price. As a result, the sales team wants you to pay as much as possible for a used car while limiting the trade-in value of your current vehicle. This creates the largest possible net profit which means more commissions for the sales team.
When shopping online this expense doesn’t even factor into the equation, especially if you are using an online auto auction website. Since the auction house is making money regardless of the final sale price they have very little invested in how much you pay. Of course they would prefer you pay more for a used car because their cut of the final sale price will be larger, but in the end they have zero control over how much you pay. All you need to do is pay $1 more than anyone else wants to pay and the used car is yours.
3. Significantly Greater Supply Which is Outpacing the Demand
There is no doubt that shopping for a used car online is a great way to save a bundle. Car dealerships, private sellers, and online auto auction sites have taken to selling cars online much faster than most used car buyers. As a result, there is a significantly greater supply than there is a demand. As a result, the average prices are notably lower which means a huge potential for savings. Until the number of people buying cars online outpaces the availability of used cars being sold, the buyer will always have the advantage.
4. More Freedom to Look for the Best Deals
As a used car buyer you have a lot more options when you shop online. If you shop locally then you probably have a handful of dealerships to choose from but your options are necessarily limited by geographic constraints. Shopping online eliminates all of the geographic constraints you are currently forced to deal with. As a result, you can literally buy a car from anywhere. This is ideal for people who want a specific type of used car but few are readily available in the surrounding area. By going online, you can buy the specific type of car you want from an area which has a surplus of them which means lower prices. This increased level of freedom is another factor which gives used car buyer significantly more power than if they were shopping at a dealership.
5. Low Pressure Sales Environment Makes It Easier to Make Smart Decisions
It is amazing how many people go to a dealership simply to look at what’s available and end up leaving with a used car they didn’t necessarily want. This is because dealerships use a variety of sales tactics which place pressure on buyers. By shopping online you eliminate the external stressors which will allow you to buy the used car you actually want, whenever you want to buy it. Not only does this save you money but it makes the entire purchasing process easier and more enjoyable.
6. Information about Every Vehicle is Readily Available
The final benefit of shopping for a used car online is the ability to access vehicle information instantly. While this is less of an advantage now that smart phones are commonly used to research cars onsite, it is still easier to do in-depth research from home. The key to making a great purchasing decision is having as much information as possible to help guide the decision making process.