How does buying a car online work?

Just like purchasing a car in-person at a dealership, buying a car online necessitates paperwork prep to prove you're qualified to get behind the wheel. Unless you're paying in cash, you'll need to determine what your budget allows for your monthly car loan payments, know your credit score beforehand, and get pre-approved for the loan. If you're trading in your current car, you'll also need to gather all relevant records and titles. You can also begin the process of purchasing or transferring your current auto insurance.

Once you have your papers and an estimate of your desired spending parameters, it's time to start the e-search. One benefit to shopping online is you're not limited to the models that a dealership might have on the lot on any given day. If you have a particular make and model in mind, you can choose a dealer – including those outside your immediate area – based on who's offering the best rate. Cost-wise, bear in mind that while it is possible to purchase a vehicle out-of-state, sales tax will be applied based on the state in which you register the vehicle.

Next, you'll have a conversation with a salesperson at one or more dealerships, either by phone or email. Online-only retailers like Carvana allow you to skip this step because their system allows for digital inquiries. If you're comfortable with it, you can use this time to negotiate, letting the agent know you're currently shopping around for the best price. If you'd prefer to handle all aspects of the transaction remotely, be sure to check with the representative to confirm they offer that service; some require an in-person signature, such as for the bill of sale.

If you're open to at least a partially in-person experience, then you can also schedule a test drive of any cars you have in mind. Select dealerships have curbside deliveries for both purchases and test drives. If you're purchasing a used car, now is also a good time to ask for the VIN (Vehicle Identification Number) to get a detailed picture of its history, including previous damage, accidents, and even theft.

One benefit to shopping online is you're not limited to the models that a dealership might have on the lot on any given day.

Do I need auto insurance when I buy a car online?

In most states, when you’re buying a new car, you'll need to have car insurance before you drive off the lot. When buying a car online, check your current auto insurance policy if you have one; it will likely grant you a seven- to 30-day grace period covering your new car to the same extent of coverage you had on your previous car. You need to notify your insurance company during that window and secure appropriate coverage for your new vehicle. If you don't currently have a policy, nearly every state requires you obtain one before you purchase the car.

Learn about how insurance works for new cars.

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