Last Updated on June 1, 2022
There’s a comparison any prospective car owner should consider today. The decision involves both local in-person car dealerships and online-only car dealerships like Carvana. In a battle between the two, Carvana vs car dealerships: which should you pick?
For generations, standard car dealerships have been the go-to solution for customers wanting a car, new or used. But the market has encountered a big issue as of late.
There’s a shortage of new cars fueled by an undersupply of microchips, coupled with high consumer demand for cars. The high demand was fueled by excess cash flow after pandemic-related travel restrictions. Now with the new car shortage, there’ve been increased sales and increased prices for used cars.
The market size of the used car dealers industry reached $160.4 billion in 2021 after experiencing a compound annual growth rate (CAGR) of 3.2 percent since 2017. This is a stronger growth rate than the overall economy. In 2022, the used car dealers industry is expected to grow by 4.7 percent and experience a CAGR of 5.5 percent until 2027.
Besides car dealerships, people find used cars by searching classifieds for private sellers, using a car broker, car concierge, or a car subscription service. They can also visit auctions or use peer-to-peer marketplaces like Craigslist and Facebook Marketplace. Another option is to search listings posted online by car dealerships, such as Carvana or Vroom.
People have been using peer-to-peer (P2P) marketplaces for a long time and are familiar with the scams, safety risks, lack of information, misinformation, ghosting, and other unprofessional activities that sometimes happen.
These experiences are mitigated with companies like Carvana and Vroom. Their sites are company managed and guarantee all products and services. On the other hand, Facebook and Craigslist don’t manage transactions made on their sites.
The benefits of online car dealerships
With more than 25,000 cars posted online, Carvana is one platform for buying and selling used cars that is growing in popularity. And besides a greater inventory selection, Carvana offers some other perks traditional dealerships don’t.
Similarly, Vroom boasts a wide selection of vehicles too. Their stock includes thousands of varying makes and models, some of which people can’t find locally.
One perk is the ability to buy a car from the comfort of home. The trend of increased online shopping during the pandemic applied to the used car industry as well. You don’t have to deal with bad weather or waiting in line. You don’t even have to get dressed or out of bed!
Another big plus is having the ability to shop at times not confined to the typical work day. Years ago, people could only research, not purchase any cars after 7-9pm, or depending on when dealerships closed. Today, people can shop and purchase a car at night, because the final part of the sales process is no longer tied to in-person labor.
An intimidating touchstone for the used car buyer is negotiating, especially negotiating with someone who’s a trained car salesman. No negotiating skills are needed when buying from Carvana because nothing is negotiable. Vroom is the same way, though with either you can trade in a vehicle to affect the price.
Carvana offers something else. For a nominal fee, you can have your purchased car sent to your home, where you can test drive it before making the purchase official. Otherwise, you can pick up your car from one of the company’s 24 vehicle vending machines. These are towers stacked with a column of cars on four sides, eight to ten stories in height.
According to the company, every car undergoes a 150-point inspection. Each car also comes with a Carfax report and a limited 100 day/4,189-mile “worry-free guarantee.” Like Carvana, Vroom offers a Carfax report and allows for returns within a 7-day or mileage limit.
With both companies comes a final perk. As part of the purchase process, you can input your data and see real, personalized numbers. For some this is more pleasant than giving your data to someone else in order for them to verify your worth, as you watch them punch number after number into a calculator.
The drawbacks of online car dealerships
These online car dealerships offer great benefits, however, they have disadvantages too.
The flip side to not having to negotiate is not being able to negotiate. If you believe you get better deals due to your negotiation skills, those powers are moot here. There is no negotiating with Carvana or Vroom.
Also, don’t expect to see any deals or promotions to increase the value of your purchase. Though standard dealerships will run these regularly to compete with other local dealers.
The test drive is an important part of the purchase process. When you purchase a car with Carvana, you test drive the vehicle only after all the financing approval paperwork and wait time for the vehicle to be delivered to you. Same with Vroom. With Carvana, you have seven days or 400 miles to return the vehicle, no questions asked. Vroom gives 7 days and a 250-mile limit.
However, by going to a car dealership, you can test drive the vehicle before completing arduous paperwork. And by test driving vehicles on site instead of waiting for a delivery, you can shorten the time it takes to buy a car.
Returning a car can be a hassle. Since the test drive period happens after purchase, saying “no” to the car at that point requires a lot more work than saying “no” to a car after test driving at a dealership.
Carvana only offers a 100-day warranty. Whereas, a lot of people are used to purchasing vehicles with multi-year protection plans. However, with Carvana, after 100 days, all vehicle issues are 100 percent the vehicle owner’s responsibility. Vroom’s warranty period is 90 days or 6,000 miles, whichever comes first.
And whereas many dealerships offer car repair and maintenance services, online ones do not. They rely on third parties to provide repair work, which can be more of a hassle than bringing your car into your local dealership for repair. The third-party companies may not be reputable or professional.
For Carvana, wait times are long and vehicle vending machines are only in 24 communities across the US. However, there are probably numerous used car dealerships in your community.
One final drawback to watch out for is the vehicle’s history. Online dealers promise inspections, but one man looking for a “hassle-free car buying experience,” got anything but that from Carvana. Seven months after his purchase, the vehicle was repossessed. Apparently, the automobile was a stolen car, which then revealed the vehicle also had undisclosed mechanical issues.
His story doesn’t mean Carvana is never to be trusted again, but offers plenty of reason for potential buyers to be cautious. Always do your homework before buying a car anywhere.
Dealerships maintain a competitive edge
Car dealerships still maintain a competitive edge over online sales in various ways. They’re geographically close to you, offer expert service, better warranties, a less committed test-drive experience, and get you better deals. Car dealerships are staffed by people with whom you can make real connections.
Related to this are the loyalty incentives that dealerships offer customers to repeat business with them.
And, even if you believe the advice you receive from salespeople at car dealerships is biased, you will still get better help regarding personalizing a car or financial assistance at a dealership than Carvana. Or Vroom for that matter.
Finally, purchasers of used cars often have a car they wish to sell, and you’re more likely to get a better trade-in value at a walk-in dealership.
Carvana vs Car Dealerships: The Verdict
There are pros and cons between both online companies like Caravana or Vroom and the local dealerships. Which is more beneficial than the other will largely depend on the individual. Spend some time making a pros and cons list and see which one comes out on top.
If both tie, or you’re just not interested in either, there’s another option to consider. Many dealerships stock their collections by purchasing cars at auctions. They acquire the vehicles then sell to customers like you.
Instead of buying from the dealership you can go directly to an auction. There’s a decent selection and often at a more affordable price. Not all auctions are open to independent buyers, but with a bit of research you can find some online auctions companies willing to sell you your next automobile.