Car-Buying Services: What You Need to Know

How Car-Buying Services Work

Just as there are many automotive makes and models, there are various business models for car-buying services. Some are more like an economical Toyota, while others are more like a feature-packed Mercedes-Benz. Generally, car-buying services operate in one of four ways.

1. Online Car Retailer

State laws generally prohibit consumers from jumping online and buying a new car directly from a manufacturer. But you can complete at least some of the car-buying process through a car dealer's website. Used cars are typically easier to purchase online.

You normally can shop online for a car through a dealer's website, schedule a test drive, negotiate a price with the dealer's internet sales team and maybe even have the car driven to your home.

Aside from saving time and effort, you can avoid back-and-forth, in-person haggling when you buy a car online. However, if you choose not to visit the dealership to see and drive the car before you buy it, you might be disappointed with your purchase. Plus, your negotiating power might be limited online.

How much does it cost to use an online car retailer? Online car retailers normally don't add any fees that you wouldn't also pay at traditional dealerships.

2. Car Concierge

A car concierge offers a departure from the traditional car-buying experience. This type of business finds a car for you, negotiates the price and eliminates the headaches of handling the purchase on your own. Furthermore, a car concierge might have access to cars that aren't available to the public. Car concierge businesses generally work only on behalf of buyers and typically deliver white-glove service.

Using a car concierge might result in cost savings. For instance, they might be able to more easily maneuver around pesky fees and costly add-ons. And once you buy a vehicle, the concierge can deal with the paperwork and arrange for pickup or delivery of your new ride.

How much does it cost to use a car concierge? A car concierge charges a fee (often a flat fee in the hundreds of dollars) for its services. Therefore, the upfront cost to purchase a vehicle might be slightly higher.

3. Car Broker

A car broker leans on expertise in car financing, fees and add-ons to find cars for customers and work out purchase deals. In some cases, they're former employees of car dealerships.

Aside from eliminating the need for a buyer to do business directly with a dealer or private seller, a broker can potentially save you money by navigating the ins and outs of car dealerships and relying on industry connections to score attractive lending arrangements.

How much does it cost to use a car broker? Car brokers generally earn money by charging retainer fees and purchase fees. These fees might be a flat amount, a percentage of the purchase price or an hourly rate.

One drawback to using a car broker: Some of these professionals might charge you a smaller fee than others or even no fee, but they may receive a commission for steering business to certain car dealers. As a result, a car broker may push you toward a deal that might not necessarily be in your best interest.

4. Car-Buying Program

Many organizations provide car-buying programs to members or customers. These organizations include banks, credit unions, insurance companies, retailers and clubs.

Car-buying programs generally offer car-buying research tools, member-only incentives and deals, and access to a large inventory of new and used cars. Through platforms like TrueCar, these programs connect buyers with dealers. They also might pair buyers with lenders.

How much does it cost to use a car-buying program? TrueCar doesn't charge fees for its services. Rather, it ordinarily receives fees from certified dealers. In addition, TrueCar might collect fees from auto manufacturers and third-party service providers. The car-buying program at big-box retailer Costco is similar in that approved dealers pay to participate, but customers don't (except for the normal Costco membership fee).

Pros and Cons of Using a Car-Buying Service

The pros of using a car-buying service include:

• Less hassle
• Less time spent on the car-buying process
• Potentially better chance of finding the car you want
• Potentially lower price tag for your car.

The cons of using a car-buying service include:

• Potentially higher overall cost due to fees charged by the car-buying service
• Potentially less transparency into whether you're actually getting a good deal
• Possible waste of time and money if you don't buy a car through a car-buying service after seeking its help
• Chance of being unable to see or test-drive the car

What to Consider Before Using a Car-Buying Service

Before signing up with a car-buying service, consider these questions:

• Which type of car-buying service should you use? For example, would you prefer the hands-on service that might be promised by a car concierge or the no-fee service usually provided by a car-buying program?
• What's more important—getting the car you want or saving money? Due to fees and other additional costs, a car service may be able to get you the right car, but at a premium over what you might pay for something else.
• Are you OK having less control over the car-buying process? By using a car-buying service, you'll give up control in exchange for doing less work and navigating fewer hassles.
• Are you willing to pay more for something you can do on your own? Using a car-buying service will likely wind up costing more money than purchasing a car by yourself.
• Where do you find a reputable car-buying service? As you figure out which service to pick, check online reviews of car-buying services, and ask friends and relatives for recommendations.

The Bottom Line

Using a car-buying service can make the car-purchasing process less complicated. One of these services generally can find a car for you, negotiate a deal, connect you with a lender and even arrange for your car to be delivered to your home. But these perks frequently come at a price, as many of these services charge fees. Before signing up with a car-buying service, consider whether it'll end up saving you money or costing you money.