In the past, car buyers had only two options: buy from a private seller (i.e. an individual) or buy from a traditional dealer (i.e. a professional salesperson). These are still both viable options, and in fact the internet makes both easier, for example through online classified ad sites. But several other choices have grown in popularity in recent years: car buying services, online networks, and no-haggle dealers.
Car buying services will help you get the car you want at the best price possible, by doing the comparison shopping for you. Providers of this service include CarBargains (800.475.7283), AutoAdvisor (800.326.1976), and CarQ (800.517.2277). Given that they charge fees of $200-500, the services usually make sense only if the car is reasonably expensive… otherwise the amount they save you might be less than the amount you pay them.
Online networks work with a large number of dealers to help you find the car you want in your area. The leaders are Auto-by-Tel, Autoweb, and MSN Carpoint. You enter your information and a nearby dealer contacts you with a fixed, no-haggle price. The one drawback is that most of these services offer geographic exclusivity to dealers, eliminating the competitive bidding among dealers that can lower the cost for you. In general, the prices tend to be good, but not great.
There are also “offline” no-haggle dealers who save you the trouble of negotiating by offering fixed prices. Carmax and AutoNation are the leaders in this area. Again, the main attraction is convenience. But as with online networks, the prices tend to be good but not great.
If you are an excellent negotiator and don’t mind a little extra effort, you’ll probably do better at a traditional dealership. If you’re a terrible negotiator or don’t have time to do the legwork, you’ll probably do better through an online network or no-haggle dealer.