The Limits of Car Buying Services

If you haven’t noticed, there has been a lot of innovation around buying cars.  What CarMax is doing is now considered just another choice.  TrueCar is even getting a little dated.

But in these days of innovation and entrepreneurship, there is a new wave of car buying options entering the market.  Here’s a few of what is new:

  • allows you to start up a conversation around a vehicle with a dealership.  Let the beatings begin earlier
  • allows customers to use a third party for all aspects of the car buying process.  All you need to do is come up with a number you want to spend.  And take delivery.
  • is where you skip the dealer and buy the car online, to the point where a Caravana transport brings you a car for a 7-day test drive.
  • is almost too good to be true.  If you watch the video, you wonder how they make money.


These services and others like it are great, they are innovative, and more than a few of them will be around in 5 years.

But they all share an expertise that their customers aren’t interested in: learning the ins and outs of buying or leasing a car.

Recently, I perused a great article in Wards  Titled “Free Advice for Present and Future Car Buyers”,  the article revealed some sad news.  Financial literacy is still quite low.

Young people are as proficient as ever at analyzing poems and dissecting frogs, says Eric Smith, who, alas, also notes a knowledge-deficiency constant he’s seen as a teacher for more than two decades.


“I’ve seen the level of financial literacy unchanged over the years,” he says. “It’s dismal.”


Such cluelessness can particularly manifest itself during a vehicle purchase and all that goes with it, from knowing enough to match selection to budget and understanding the intricacies of a car loan.


“Financial literacy as a life skill is something you want to have when you are purchasing a $30,000 product on credit,” says Susan Fitzpatrick, Ally Financial’s director-communications.


When it comes to buying a car these days, new startups like the ones above promise no hassle, no haggle and privacy.  Paying a little premium for this convenience is the bargain. As long as the process ends with a buyer getting the car they want at the monthly number they can afford, then they’re in.  If a buyer who doesn’t want to be bothered is sold that the number “X” is the best they’ll get on their own, then the service that saves them money over “X”, will be seen as a hero.

The unholy bargain is over the value of “X”.  Some will believe “X” with all their hearts.  Others will call it a “cost of doing business”.  A few will understand that they just got “rogered” and move on.

I’m not accusing these new entrants of tricking people.  If anything, the first round of companies will be more favorable to the customer.  I’m worried about the ones that come in the second and third rounds.  These are where the real sleazeballs hang out.

The only way to protect oneself is to educate yourself on the process.   Or go to CarMax.  CarMax has got buying and selling cars down to a customer-friendly science.

Needless to say there are still a lot of people who do research to try to figure out what the best vehicle is for them and what the best deal is for their budget.  And I don’t think you need to get a P.hD in negotiation.  You need to have 3 vehicles in mind, so you have choice.  You do need to know your credit rating.  You need to know your interest rates and payments BEFORE you arrive at a dealership-so you have something to compare their offer to.  Know a little about the cost to insure your top 3 choices.  Most of all, you need to be ready to walk away from a deal as well.  Because no matter what the sales guy says, there’s another car like that out there.

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Sebastian James

Accept no substitutes

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