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How To Buy A Car Online: What To Know Before You Shop

Hanna Kielar6-minute read
UPDATED: December 12, 2022


If you're in the market for a car, visiting a local dealership isn't your only option. Thanks to the rising popularity of internet car buying, you can get financing, browse available inventory and have a car delivered to you without ever leaving your home.

We’ll break down how to buy a car online and walk you through every step of the process for the best online car buying experience.

Table Of Contents

    Can You Buy A Car Online?

    The COVID-19 pandemic has changed the way consumers prefer to buy cars. According to the National Automobile Dealers Association, 68% of shoppers feel buying cars online is a good alternative to visiting a dealership, and one in five would buy a vehicle right now if given an online option.

    Internet car buying is a safe, convenient way to shop from the comfort of your home. Almost every part of the process can be completed over the internet, and you can rest assured that payments made through online dealerships are financially secure.

    If you need financing, you have options. You can choose to use financing from the dealership, or shop around online. Internet financing companies can offer favorable terms and competitive interest rates, which may save you hundreds of dollars over the lifetime of your loan.

    The Best Way To Buy A Car Online

    Buying a car virtually differs from in-person shopping in several ways. Instead of walking through a car lot, you can find the exact vehicle you're looking for online with just a few clicks.

    Getting approved for a car loan, ordering a prepurchase inspection and setting up a test drive can all be handled remotely, too. Before you start shopping, here's what you should expect from a successful online car buying experience.

    Step 1: Find Out What You Can Afford

    Financial anxiety can ruin any joy ride, so it’s important to take the proper steps to ensure you can purchase your car without buyer’s remorse.

    Set A Budget.

    Ideally, you should aim to spend no more than 15% of your gross pay on a monthly car payment. The car's sticker price isn't the only cost you need to consider. You'll also have to pay taxes and fees, which vary by state. Expect to pay 5% – 10% in sales tax and $50 – $600 for the documentation fees. Other factors to consider in your budget include insurance rates and typical maintenance costs for the vehicle.

    As an example, if your gross pay is $4,000 per month, you could afford a car payment up to $600. With a 48-month loan at 6% interest, you're able to get financing for approximately $25,550. Assuming a down payment of $2,500, you'd have a car budget of $28,048.

    Calculate Your Auto Loan Payment

    Please enter a purchase price between $100 and $100,000.
    Please enter a down payment amount between $0 and $100,000.
    Please enter a term between 24 and 84 months.
    Please enter an interest rate between 0% and 30%.

    Your Monthly Payment

    Total Paid Over 60 Months

    Total Interest Paid

    Loan Balance Over Time

    Please enter a value between $0 and $1,000.

    ... you'll save $0 in total interest

    This auto loan calculator estimates a monthly payment based on the loan amount, term, interest rate and additional payments that you input. You can then change the loan amount, interest rate or repayment term to see different options. Calculated payments and savings are estimates only, as your actual rates and payments may differ from the estimates provided by this calculator as a result of qualifying factors. This is not a commitment to lend.

    Check Your Credit Report.

    It's a good idea to know your credit score and review your credit report for errors before applying for a loan. Errors can negatively affect your credit score, which can impact your ability to get a loan or lower the amount you're approved for. Common errors include:

    • Misspellings and incorrect names, phone numbers and addresses.
    • Credit limit and account balance errors.
    • Closed accounts reported as open, and other account reporting errors.

    Determine Your Credit Range.

    Your loan's interest rate is highly dependent on your credit range. Typically, the higher your credit score range, the more favorable your interest rate will be. Lenders tend to prefer borrowers in the prime range of 661 – 780 or better. If your score falls below this range, consider trying to improve it before you apply for a loan. Ways to boost your score include:

    • Limit debt: Keep your credit utilization ratio (your overall limit compared to your total debt) at no more than 30%. Pay off your highest balances and maxed-out cards first.
    • Pay your bills on time: Avoid racking up interest, late fees and credit hits by setting up auto-pay, if possible.
    • Pay off past-due amounts: If you already have late bills, they may be significantly hurting your credit score.
    • Avoid applying for other new sources of credit: Doing so can lower your credit score by several points.

    That said, lenders view loan applications more favorably than credit card applications. And most credit reports count multiple loan inquiries within a 14 – 45-day window as just one hard inquiry. This lets you shop for the best terms without lowering your score.

    Step 2: Get Preapproved For An Auto Loan

    Getting preapproved for a car loan gives you more confidence in what you can afford and what you’re likely to qualify for. This can help you negotiate when you’re at the dealership because you have a better idea of what your loan might look like.

    Loan amounts, interest rates and requirements vary by lender. If you have questions about how to get a car loan, consider asking an agent at your bank, your credit union or an online lending company. Please note that getting preapproved may slightly decrease your credit score for a short period because it requires a hard credit pull.

    Step 3: Know Where To Look

    Once you’ve gotten this far, it’s time to consider the best places to buy a used car. Many dealerships let you browse inventory on their website, chat with salespeople and complete your purchase entirely online.

    Craigslist, eBay Motors and Facebook Marketplace have a good selection of cars to choose from. Both dealers and individuals can list vehicles on these sites. You'll occasionally find bargains on marketplaces like these, so it's smart to check them out if you're shopping for the best price.

    Online vehicle sites also allow buying out of state, giving you access to a larger selection than ever before. You'll likely be unable to inspect or test drive the vehicle yourself, but you can hire a remote inspection company to do this for you. If you're looking for a car that's rare or unique (for example, painted an unusual color), buying online may be perfect for you.

    Step 4: Find The Right Car

    Once you've found a car you're interested in, do some research to see if it's a good fit for you. Compare the vehicle's cost to the price of similar cars to ensure you're getting a fair deal. You can also look up the car's Kelley Blue Book value to see if it's priced right for its condition. Running a CARFAX report shows you the vehicle's history and maintenance records, which can be a useful tool for uncovering prior accidents and other hidden problems.

    Step 5: Take A Test Drive

    Next, contact the seller to schedule a test drive. Local dealerships may be willing to bring the car to you for a test drive; this has become especially common in the wake of the pandemic. Be sure to ask if this is an option. Some online dealerships like Vroom and Driveway will let you test out a vehicle to see if it’s right for you. If you return the car within a specified time frame, though, they will offer a refund of the purchase price.

    If you're buying from an individual, you'll typically have to go to their location to test drive the car. If the vehicle is out of state, consider finding or hiring a third party who can test drive it for you. You also have the option to skip a test drive altogether if you want.

    During the test drive, be sure to:

    • Check the interior and exterior for cosmetic damage.
    • Listen for strange noises when the car is running, such as grinding, squealing or engine whining.
    • Make sure all systems work, including the heater, air conditioner, radio, gauges and warning lights.
    • Pay attention to acceleration, braking and how the car runs at both city and highway speeds.
    • Take pictures and ask for additional pictures of internal components if you can’t access them.
    • Discuss any warranties still valid on the car.

    If you’re going to test drive a car from an individual, make sure you let someone you trust know where you’re meeting and when, and take a picture of the seller’s license and license plate. Always meet in a well-lit, public place.

    You should also be aware of any fees associated with returning a car after a certain test drive period. You may not get a refund on the delivery fee if you choose not to purchase the car.

    Step 6: Get A Prepurchase Inspection

    There are many companies and mechanics that will perform prepurchase inspections for you. To avoid missing anything, find a mechanic who has experience in the car you’re interested in. Request a detailed inspection report for you to review. Reputable companies may also promise to cover damages caused by issues they've overlooked.

    Step 7: Complete The Sale

    Once you're preapproved, you're ready to move forward with the financing process through the dealer or your own lender.

    Step 8: Have The Car Delivered To Your Door

    Having the car delivered to your door is the easiest way to bring home your new purchase. Generally, the cost to ship a car depends on the distance, so be sure to discuss this with the dealer before closing on the deal.

    The Bottom Line

    Buying a car online can save you time and money and provide access to an almost unlimited supply of vehicles for sale, all while avoiding unnecessary visits to the dealership. Shop smart online by setting a realistic budget, getting preapproved for an auto loan and making sure your credit score is the best it can be.

    Hanna Kielar

    Hanna Kielar is a Section Editor for Rocket Auto℠, RocketHQ℠, and Rocket Loans® with a focus on personal finance, automotive, and personal loans. She has a B.A. in Professional Writing from Michigan State University.