Where to Buy a New or Pre-Owned Car

The best source for buying a car depends on whether you plan to buy pre-owned or new.

The table below lists the pros and cons of the most popular sources for pre-owned cars. The best choice for you depends on your budget, your access to these sources, and your personal tolerance for risk. For instance, first-time pre-owned buyers who are anxious about buying from a private party might instead choose to buy from a more reliable source, such as a new car dealer or a national rental car company. (For specific tips on what to look for and test out when buying a pre-owned car, see How to Buy a Pre-Owned Car.)

Most dealerships and superstores maintain websites where you can search for and buy pre-owned cars. In addition, eBay Motors (www.ebaymotors.com) and Craigslist (www.craigslist.org) have become the most popular way for private parties to sell pre-owned cars. Researching and browsing online is a great way to educate yourself about the market for, and the sources of, the type of pre-owned car you’d like to buy. But buying a pre-owned car online can still be very risky. Never buy a pre-owned car sight unseen. Instead, insist on seeing the car in person, and have a third-party mechanic inspect the car for problems you couldn’t detect on your own (see How to Buy a Pre-Owned Car).

The two most popular sources for new cars are dealerships and websites.

The traditional method for buying a new car—walking into a local dealership—remains the best approach if you prefer the face-to-face interaction and personal service you just can’t get online. However, this personal service comes with two major trade-offs:

Dealers have responded to their online competition by offering unique promotions and services, such as fixed, haggle-free pricing, tryout periods (after which you can return the car for a refund with no questions asked), and free or discounted maintenance and repairs. If you do decide to shop and buy locally, research cars online and bring printouts to the dealer of prices and options packages you find. Though dealers likely won’t match these offers completely, you can use the terms in these offers to support your negotiations (see How to Buy a New Car).

Three of the top websites for buying new cars are Auto-by-Tel (www.autobytel.com), CarsDirect (www.carsdirect.com), and CarMax (www.carmax.com). When buying a car online, you have to select the options you’d like, get a price quote, and arrange payment details before you can have any interaction with a dealer. The website then directs you to a local dealership where you can actually test-drive and buy the car at the price you’ve already arranged. Dealers pay to be listed on these sites, since they essentially funnel customers straight to dealerships. You end up having little interaction with the dealer, which most buyers like, and in turn you often get a lower price (but less personal service). Some dealers actually maintain their own sites or sell directly to buyers on eBay Motors. These dealers don’t rely on third parties for customer referrals and therefore can usually offer lower prices.

Buying a new car online is safer than buying a pre-owned car online for a few reasons. First, new cars come with warranties and are protected by the lemon law: if your car doesn’t perform properly, the dealer is legally obligated to replace it. Second, even though you’re technically buying online, you’re really still buying from a dealer. The car you get will be in the same mint condition and subject to the same rigorous quality inspections as a car you’d get if you walked in and bought directly from a dealer.