A number of start-ups are betting that enough people hate going toe-to-toe with a used-car salesperson (or random strangers on Craigslist or eBay) that they’ll embrace the prospect of buying a car online from a vendor that offers a no-haggle, seamless experience.
Their short, cute names—Vroom, Beepi, Carvana and Shift—reflect the venture-capital culture and money behind them. Most don’t have a national reach yet, and only Vroom is willing to ship you a car anywhere in the lower 48 without an additional fee. Also, only one of the firms we looked at offers you a prepurchase test drive. But having surfed their sites extensively (though I didn’t actually buy a car), I think this new business model has traction.
It may be as easy to plop a mint-condition Mercedes into your shopping cart as a pair of shoes from Zappos, but how do you know the car is any good without a test drive? Vroom and its competitors address concerns about condition with oodles of photos, inspections, title checks and short warranties that are secondary to the manufacturers’ warranties. They also promise a 100% money-back guarantee (within a fairly limited time and number of miles) if buyer’s remorse kicks in. For example, Vroom offers a refund as long as you don’t exceed 250 miles during a seven-day test-own period. At Carvana, you can get a refund within seven days if you haven’t driven more than 400 miles. Beepi and Shift have similar guarantees.
In Shift’s markets (California and Washington, D.C.), a “car enthusiast” will bring you the car and let you take it for a spin. That prospect might scare away those who fear being stuck in a car with a used-car sales rep, but Shift does not pay these car guys (and gals) on commission, and the outing I had with Matt in a Volkswagen Golf R was totally devoid of pressure. Plus, he really knew his cars.
What about prices?
The sites tout better deals than you’d get at a dealership. One big reason is that they don’t have the expense of owning a traditional lot on prime real estate. Shift, for example, keeps vehicles in a parking garage in Northern Virginia. But explanations of what goes into their price comparisons are often a mumbo jumbo of “data points” and “future price forecasts.” We shopped for similar versions of that great American staple, the Toyota Camry, at all four sites and found the prices fairly close to what sites such as Edmunds and Kelley Blue Book say consumers are paying after haggling. The vendors’ processing or documentation fees, for doing paperwork and the like, are no higher than at traditional used-car dealers, and Carvana charges no such fees.
Financing is available through all of the online vendors. A quick estimate of the monthly payment is either on display or can be easily calculated, but it’s based on preloaded interest rates or on values you enter. You may be able to do better if you bring financing from your bank or credit union.
Motor vehicle departments still want their forms signed the old-fashioned way, which will likely mean overnighting documents; all vendors are eager to smooth out the process and deliver a car that’s ready to drive, with a temporary tag on it. If you’re in range of Carvana, its delivery gimmick—a used-car vending machine in downtown Nashville—is an experience you’ll want to bring your friends to watch.
Planning on trading in your existing car as part of the deal? Most of the sites accept trades. In fact, they’ll offer you a price after you send your car’s VIN and some photos, plus answer a few questions about its condition. But get independent estimates of your car’s value before going this route. For example, CarMax offers free appraisals.
And note that the no-haggle model has been in place for decades at CarMax. You can’t swipe your phone to buy a car there, but it does offer far more inventory at its 150 locations than even the most ambitious of the online vendors.
In his former role as Senior Online Editor, David edited and wrote a wide range of content for Kiplinger.com. With more than 20 years of experience with Kiplinger, David worked on numerous Kiplinger publications, including The Kiplinger Letter and Kiplinger’s Personal Finance magazine. He co-hosted Your Money's Worth, Kiplinger's podcast and helped develop the Economic Forecasts feature.
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