What You Need to Know About Using a Car-Buying Service

Car Buying Services - Are They Worth It?

By Michael Koretzky

The last two new cars I bought, I did so without speaking to a salesman.

I bought a vehicle in 2004 after emailing every dealer within a 50 mile radius of my house. I haggled via email with a half-dozen of them, probably spending about the same amount of time it would have taken to visit a couple of showrooms.

My car before that, a brand-new 1996 Oldsmobile, was an easier experience. I simply hired a car broker I learned about from a co-worker. The broker called me, asked what I was looking for, discussed prices and options, and went on his merry way. A week later, he found the perfect car at a near-perfect price. He even had it delivered to the parking lot at my office building. Best I can tell, I saved a couple thousand dollars by buying a car online, and slightly less buying a car through a broker. These are two of the options to consider if you want to buy a car. Here's a guide to these and related ways to make this important purchase, and other key considerations before you take the leap.

1. Not all services are the same. As you saw in the video above, Money Talks News founder Stacy Johnson recently used a car buying concierge service, Authority Auto, that saved him $2,000, but he spent $795 to do it, so he only netted $1,205. Still, spending $795 to make $2,000 is a 60 percent return on investment within a very short time -- good by pretty much any standard.

In my case, the broker I hired didn't cost me a dime. He made his money by charging the dealer instead of charging the customer. Brokers often have close relationships with a handful of dealers in the area who are willing to give them a discounted price because of the volume of sales they generate.

I could have gone to a car concierge like the one Stacy used. They generally charge customers a flat fee or a percentage of the savings they generate for the buyer. Generally, a concierge scores deals by casting a wider net. As the name implies, concierges excel at buying luxury or harder-to-find vehicles.

In addition, there are car-buying services available through membership organizations, such as the AAA Auto Buying Service and the Costco Auto Program. (AAA is regional or sometimes just by state, so it's best to just track down the link on your local club's website. Go to www.aaa.com to get started.) Many credit unions also offer this service, including those from PenFed and USAA.

Before selecting a service, get the answers to these questions:
  • How is the service paid? If the service is being paid by the dealership, what gives it the incentive to find you the best possible price?
  • What services are included? Will the contract be ready for your signature? Will the car be delivered to you? Is the service simply introducing you to potential sellers? What else is involved?
2. Consider selling your old car on your own. In my case, the car broker offered to include my old car in the deal for a new one. But I quickly figured out I could sell my ancient, no-frills Nissan hatchback on my own for a few hundred more.

Then I had a change of heart and let the broker handle the trade-in. Why? Because I was willing to lose some value if I could gain some free time.

Do this math for yourself. If you're willing to put in the hours, sell your trade-in and pocket the cash. If it's too much hassle, or if you live in a small town where your customer base may be limited, consider doing what I did.

3. Do your own research. A broker, concierge or buying service can save you legwork, but you still need to do your homework. Spend some time online studying what vehicle you want, the options you crave and those you could do without. You want to give the service as much detail as possible. In my case, the broker said I would save time and money if I didn't care what color my Oldsmobile was. So I ended up with a red car, which was fine with me.

4. Line up your financing in advance. There's no point in shopping for a car, or anything else, until you know you have the money to buy it. Shopping for a car before securing the loan is like stepping on the gas before you're in gear: You may make a lot of noise, but you're not going anywhere.

5. Figure out what happens afterward. What happens if you get a lemon? What if you just don't like the car when you show up on the lot or it's delivered to your door? Also, if you want it to be maintained by a dealership, where's the nearest one that services your make? Besides the potential savings, a major advantage to embracing one of these services is sparing you time and hassle. If you don't ask these questions upfront, you could be facing complications and demands on your time after the sale.

6. Consider what your time is worth. If I had to do it all over again, would I use another broker or buy on my own? At the time I called the broker, I was starting a new job, so it was invaluable to me to have someone else handle the purchase -- even worth forgoing a few hundred dollars on the sale of my old car -- so I could focus on proving my value at work. And I ended up getting a great deal on the car.

However, shopping and comparing prices online continues to become more efficient, so hunting down the best deals on a new car and selling an old car becomes an increasingly worthwhile DIY project. If you're willing to put in the time online, you can save more, especially if you're buying a popular, midpriced model that many dealers have stacked on their lots.

Have you used a car-buying service? Share your experience in the comments below or on our Facebook page.

-Ari Cetron contributed to this post.

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