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Auto Loans

How to Buy a New Car Online

Buying a new car can be a time-consuming process, and going to a dealership and enduring hours of negotiation is no one's idea of a good time. The good news? It's no longer necessary.

Today, most of the research and even negotiations for buying a car can be done online from the comfort of your own home—which can come in especially handy during the coronavirus pandemic, when visiting a dealership isn't ideal.

Going through the car-buying process online can not only save you time but also give you the chance to sample more dealerships and vehicle options without requiring you to drive all over town.

If you're considering using the internet to purchase your next vehicle, here are some steps to follow.

Get Your Finances in Order

One of the most important things you can do before you even start looking at vehicles is to determine how much you can afford. Take a look at your budget, including your current car payment if you have one, to understand how much you can pay each month without putting too much stress on your finances.

Also, check your credit score to see where you stand. Unless you're paying with cash, you'll need to finance the vehicle with a lender—and the higher your credit score is, the better your chances of getting favorable financing terms such as a lower interest rate. If your credit needs some work and you have time before you need a new vehicle, consider working to improve your credit first.

Finally, you'll want to get preapproved for a loan before you communicate with a dealer. There are several lenders that provide direct financing to consumers, and many of them offer online prequalification.

Dealers often like to negotiate a longer term on your auto loan to get you to buy a more expensive vehicle and still meet your target monthly payment. But if you have a preapproval in hand, it can help you and the dealer stick to a specific sales price range.

Search Vehicle Models

If you visit a local dealer, you're restricted to the vehicle options they have on the lot. But if you're searching online, you can search new car inventories for all of the dealers in your area and beyond.

If you already know what make and model you want, it may just be a matter of finding the dealers in the area that have it in their inventory. If not, do some research based on how you want to use your new vehicle. Websites like Edmunds, Autotrader and Cars.com can provide information about model specifications, fuel efficiency, capacity, safety, price and more.

This process will help you narrow down your list of options to a few models or one in particular that you can look for near where you live.

Shop Around for Deals

Once you know the type or types of vehicles you want, search local dealer websites to see what's available in your area. In some cases, you may need to look beyond your immediate community, but for most models, there will be plenty nearby.

New car sales prices may not vary much, but some dealers may provide better incentives, such as rebates or promotional financing, so check to see if one is offering a better deal than others.

If you can find two dealers with the same model and comparable features, one may be charging less, which could give you some leverage with negotiations.

Reach Out to a Salesperson

Nowadays, dealers typically have salespeople who focus on internet sales. You'll have the chance to get more information about the vehicle you're interested in. If you've done your research about the vehicle's value and other deals in the area, you may have some room to negotiate on the price.

What's more, because you won't be doing the negotiations in person, you may feel less stressed because you'll have time to think between messages instead of needing to respond on the spot.

During this process, you can also talk about your financing arrangement, discuss whether you plan to trade in a vehicle or put money down.

Test Drive the Car

You can do the vast majority of the car-buying experience online, but you'll still want to take a car for a test drive before buying to make sure it's a good fit.

Depending on the dealer, the salesperson may offer to bring the vehicle to your house to take it for a spin. If not, make an appointment with the salesperson to visit the dealership, so you don't have to wait around when you get there.

Plan to drive around the neighborhood to get a good idea of how the car handles starts, stops and turns. If you can, take the car for a quick drive on a highway to see how it manages acceleration and high speeds. Check out the back seat to determine how roomy and comfortable it is (especially if you have a family and plan to pile into it regularly), and see if the trunk size meets your needs.

Ink the Deal

Once you've settled on a model and a price with the salesperson, it's time to finish the deal. In most cases, you'll need to complete the purchase process in person. If you're trading in a car, you'll also need to have the dealer do an in-person appraisal.

But again, setting an appointment can help reduce your time spent waiting.

Before you visit the dealer, contact your lender and notify a loan officer that you've found a car and get all the necessary information that you'll need to share with the dealer. If you're financing your car, you'll also need to show proof of insurance before driving off the lot.

When you visit the dealership, review the paperwork and make sure all the information matches what you and the salesperson decided on, and make corrections where necessary. Don't be afraid to walk away if the dealer makes changes to the agreement or insists on signing before making corrections.

Also, if the dealer is trying to sell add-ons, such as maintenance and vehicle service contracts, gap insurance or credit life insurance, research each before you buy. In many cases, you can get these for less from third-party providers.

Once everything is in place, sign the contract and take your new vehicle home or, if available, request home delivery.

Focus on Credit Now for Future Car Purchases

Whether or not you have good credit now, it's important to take steps to build and maintain a good credit history for the future.

For example, if you can't get approved for a low interest rate now, improving your credit score could make it possible to refinance your auto loan at a lower rate later on. You'll also have a better chance of scoring favorable terms the next time you buy a car or need financing for anything else in your life.

Experian's credit monitoring tool can help you with this process by providing you with free access to your FICO® Score and Experian credit report. With these, you'll be able to view which areas of your credit report that need attention and keep track of your progress.

You'll also get real-time updates when new information is added to your credit report, including new accounts, inquiries and more.

The process of building credit can take time, but the savings are worth it.