Today’s used car buyers have more options than ever when shopping for pre-owned vehicles. In this constantly changing auto retailing environment, new and used car dealers are seeing more and more online sellers competing for a share of some 40 million used vehicles sold in the U.S. annually. Online contactless sales have increased rapidly because of the pandemic but their primary appeal is the ability for consumers to buy online without having to deal with car dealers in person.
Before the internet existed if you wanted to buy a used car you’d probably look at classified ads in the newspaper and visit new and used car dealer’s lots. Now anyone can go online and find literally thousands of pre-owned vehicles available from all types of sellers including private parties, conventional new and used car dealers, Carmax and online only sellers like Carvana and Vroom. With so many used vehicle sellers out there vying for your business where can car shoppers find the best used vehicles?
To answer this question we need to understand more about where these different sellers acquire the bulk of their inventory and assess the quality and desirability of the vehicles they are offering. Used car sellers of all kinds rely on buying vehicles from wholesale dealer auctions located throughout the country. New and used car dealers bring their unwanted, aged and excess inventory to be auctioned off to other dealers and used car sellers in need of vehicles. Banks, lenders, lease companies, huge fleet and rental companies, and automaker’s own financial companies send large volumes of vehicles consigned to sell regularly at these auctions in addition to dealer consignments. These auctions are the main source of inventory for most used car sellers with an annual wholesale auction sales total of about 20 million vehicles in the U.S.
The best cars to be found at these wholesale auctions are privately owned and leased late model low mileage vehicles with no accident history and regular maintenance documented in vehicle history reports. New car dealers trade for most of these when they sell and lease brand new vehicles but don’t keep all of them to retail themselves. New car dealers generally like to keep a balanced mix of inventory of the particular models and brands that sell best for them. Vehicles in this category are the most sought after for by used car sellers who pay top dollar prices especially when they need inventory. Right now, used car sellers can’t seem to keep up with the consumer demand for popular late model low mileage SUVs and trucks.
Another good source of newer vehicles at wholesale auctions are personally leased vehicles. Most new car manufacturers have captive lenders, the financial subsidiaries of their companies, like Ford Motor Credit and American Honda Finance. These companies lease a huge number of new cars every year through their new car dealers, and when these leased vehicles are returned, their dealers have the first opportunity to purchase them. The remaining vehicles are sold at auctions to used car sellers and are a very good source of 2 – 4 year old vehicles for them. Again, these are mostly privately leased and driven by one person or household with low to average miles and tend to be in average or above condition.
The most readily available source of later model vehicles at the auctions come from large commercial rental and fleet companies. These will have average to high mileage and are typically very average in condition with more cosmetic wear and tear evident and more accident history. There is usually enough availability of these to keep wholesale prices on par with their lackluster condition and desirabilty. These are the common models that comprise the majority of what used car sellers are currently retailing in 1-5 year old vehicles all across the country.
So, where can car shoppers find the best used vehicles? If you’re looking for a 1or 2 year old vehicle with low miles and a decent warranty, then you might want a certified used vehicle, available only at new car dealers. Benefits of certified pre-owned (CPO) vehicles include additional manufacturer backed warranties, and at times new car financing programs. Certified late model luxury brands from new car dealers come with some of the best value adds which make them more desirable than comparable vehicles on used car lots and from online sellers.
Besides being able to offer certified used vehicles, new car dealers also have opportunities to buy their own manufacturer’s executive and field cars, courtesy cars and promotional cars. These are very low mileage and like new, but are sold as used to franchised new car dealers of that brand. With access to all these vehicles, and a steady supply of nice new car trade-ins and lease returns, new car dealers have a substantial advantage over all other used car sellers in acquiring the best, most desirable used cars to sell.
Even though new car dealers may have more selection of what I consider the best vehicles available, you can find very good vehicles at most reputable used sellers of all kinds if you do your homework and know what to look for.
Yes, there is a convenience factor with online sellers like Carvana and Vroom, but here are some other things to consider. Look at the vehicle history reports to see where their vehicles were sourced and try to avoid rental cars and accidents. I recently found a vehicle that Vroom advertised online for $18,800, where all their prices are non-negotiable. When I called about that vehicle I was told there was a $599 delivery fee that would be charged, making their actual selling price $19,399. Keep this in mind if you’re comparing their advertised price to a comparable vehicle a dealer has listed because Vroom’s was misleading. Carvana also charges delivery fees based on distance only on vehicles outside of your location.
If you’re considering buying from an online seller, how do you know if you’ll like a vehicle without driving it? Visit a dealer to drive one before taking that risk. Vehicles may have objectional odors from smokers, pets, perfume and cologne, etc. that you won’t discover until your vehicle arrives. Yes there is a return policy, but if you have to use it you’ve lost the convenience factor and probably that $599 delivery fee as well.
Shopping at new and used car dealers have major advantages over online sellers: Better availability of higher quality vehicles. Being able to see and drive a vehicle before buying it. Having your own mechanic inspect a car you want to buy. Pricing that’s actually negotiable. In my opinion all of these advantages far outweigh the convenience of buying a used vehicle online from your couch.
Thank you for visiting the Better Auto Buying website.
