Everything You Need to Know Before Buying a Car Online

Everything You Need to Know Before Buying a Car Online

Written by Caitlin Wood
Last Updated December 3, 2021

Second, only to a house, a car is one of the biggest financial investments you’ll ever make. Once upon a time, buying a car meant spending hours at the dealership. Back then, your knowledge of pricing, APR, and availability extended no farther than what the salesperson told you. But now, with sites like Canada Drives and Clutch, those days are long gone. 

Can You Buy A Car Online? 

Absolutely, buying a car online has never been easier. Buying a car online can mean different things for different consumers. Depending on the experience you’re looking for or are comfortable with. Generally speaking, you can classify buying a car online into two different categories, online marketplace and full-service.

Online Marketplace

When people talk about buying a car online they are typically referring to perusing resale sites, marketplaces, and even websites that belong to dealerships in their area. With this option, you narrow down your search by looking for specific makes, models, features, and location. Once you find what you’re looking for, you’ll visit the seller or dealership to test drive and finalize the purchase.

While you made the final purchase at the dealership, you make your decision online, in the comfort of your own home, without the hassle of dealing with a sales associate. 

Full-Service

In the past couple of years buying vehicles online has evolved. You can now buy a car completely online, from start to finish. Companies like Canada Drives, Clutch, and AutoTrader.ca allow consumers to find the right vehicle, apply for financing, and have the vehicle delivered to them all from their own homes.

Where Can You Buy A Car Online?

As we discussed above, there are countless online sites and marketplaces that allow potential buyers to search for vehicles available in their cities and provinces, think CarPages.ca, Unhaggle, and CarGurus. But, if you’re looking for a full-service experience where you never have to leave your house, there are a couple of specific companies you should consider. 

Canada Drives

Canada Drives

Canada Drives is the countries largest 100% online vehicle shopping platform. You can search through their inventory of used cars, find the one that meets your needs, sign contracts or agreements, and make payments all online. Then choose a delivery date that fits your schedule and have your new car delivered right to your door (currently available in British Columbia, Alberta, and Ontario).

Additional Canada Drives Benefits

  • Free CARFAX report
  • 7-day return policy
  • Free 30 day/1,500 km warranty
  • 150 point inspection
  • Optional 24 or 48 months extended warranty 
  • Trade-in available
Learn More
clutch

Clutch

Founded in 2016, Clutch’s main goal was to modernize the way Canadians shop for and buy used cars. When you choose Clutch, you can browse through over 700 used vehicles to find one that fits your needs. Their fully online experience means you don’t need to deal with sales associates and never have to leave your house. You can get pre-qualified for financing online, purchase the car you want, and set up a time for it to be delivered. During the delivery of your vehicle, a Clutch concierge will have all the necessary paperwork for you to sign.

Additional Clutch Benefits

  • Free CARFAX report
  • 210 point inspection
  • Free 90-day warranty
  • Free home delivery
  • 10 day/750 km free returns 
autotrader.ca

AutoTrader.ca

While AutoTrader.ca is one of the most popular car shopping websites in Canada and they have recently added a new feature. With their OnlineSellerPlus feature, local dealerships will deliver your car to your house so you can test drive it for 48 hours. If you like the car you keep it. Just keep in mind that this option is not available for all vehicles currently for sale on AutoTrader.ca.

AutpTrader.ca also offers the option for consumers to apply for financing, reserve vehicles, and start the trade-in process all online.

Additional AutoTrader.ca Benefits

  • CARFAX history reports
  • 100+ Point Inspection
  • Warranty programs
  • 10-Day / 750-KM money-back guarantee
  • 30-Day / 1,500-KM warranty
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Advantages Of Buying A Car Online

When it comes to buying your next car online, here are the main advantages you should consider. 

  • Easy To Filter Results: You can search for the exact make and model you want. You may even be able to set up notifications that alert you when the car of your dreams becomes available.
  • No Haggling: Don’t like dealing with sales associates? When you buy a car online you typically don’t have to speak to one at all or not at least until the deal is almost complete.
  • Get Pre-Qualified For Financing: Many sites where you can buy a car completely online also offer pre-qualification for financing. This means you’ll know exactly what you can afford before you start looking.
  • Return Policy: When you buy a car completely online, you’re taking a risk. This is why most companies offer free returns within a set period of time, typically 10 days. 

Find out if you should buy your next car online or at a dealership.

Disadvantages Of Buying A Car Online

Buying a car online is not always going to be the right option for everyone. If you’re concerned about buying a car online, here are some of the main disadvantages.

  • No Price Negotiation: While not having to deal with a sales associate might be a good thing it also means you can’t negotiate a better price. Furthermore, many sites that sell cars online won’t negotiate on the price at all. 
  • Trade-in Value Can Be Limited: While it’s great that you can trade-in your old vehicle when purchasing a car online, you might not get offered the best price. Make sure you know what your old car is worth.
  • Potential Shipping Fees: Having a car delivered straight to you after you purchased it online, what could be better? Just make sure you know what the shipping cost is and if there are any additional fees.

Cost Of Buying A Car Online

It sometimes feels like dealers and bankers are speaking a different language. The documents that accompany them, often filled with legal and financial jargon, are not much better. To stop you from getting swindled by a smooth talker, you need to make sure you’re familiar with the following Canada car loan terms:

  • Down Payment: This is the amount of money you put toward the vehicle. It lowers the amount you need to borrow and can lessen the interest you pay over the lifetime of the loan.
  • APR (Annual Percentage Rate): Most Canadian car loans come with interest and fees. Combining these two gives you the APR.
  • Term: This is the number of months you have to pay back your Canada car loan. More than half of all Canadian car loans are financed for 84 months or longer. Since it lessens the total you’ll pay for the car, we suggest opting for the shortest term you can afford.  

How To Buy A Car Online In Canada

Buying a car online has become increasingly popular in Canada. If you’re thinking about buying a car online, here are some steps you can take to make the process easier. 

  1. Determine How Much You Can Afford
  2. Get Pre-Approved For Financing
  3. Pick A Few Cars To Look At
  4. Determine Your Trade-in Value
  5. Complete Application 

1. Determine How Much You Can Afford

Before searching for a car, you should first find out how much you can afford. This includes the car loan costs as well as the additional car expenses like fuel and car insurance. Generally, it is recommended that you use the 20/4/10 rule when budgeting. 

20/4/10

To adhere to this car budgeting rule, you’ll need to put down a 20% down payment, and ensure your car loan term is no more than 4 years and that your monthly payments do not exceed 10% of your income. For example, If you have an income of $4,000 a month, you shouldn’t pay more than $400 a month on your car. That means to respect the 20/4/10 rule, the total cost of your car loan (interest and fees included) should be no more than $19,200. 

3. Get Pre-Approved For Financing

Getting pre-approved for financing can save you from falling in love with a car that is way out of your budget. You can choose to get pre-approved from your dealership or from your local bank. 

Full-Service 

If you purchase a car online through companies like Canada Drives or Clutch, you’ll be able to get pre-approved for financing prior to choosing a car. Unlike traditional dealerships who have you choose a car before checking if you qualify for financing, these full-service companies, ensure the car you choose is one you can afford. With a quick online application, they’ll provide you with a personalized loan offer that you can use when searching for your car.

Online Marketplaces

With online marketplaces, you still have to visit the dealer to finalize the details of the car and to find out if you qualify for financing. Unfortunately, not everyone qualifies, this is why it’s so important to secure financing before you step foot on the lot. Having a pre-approval letter also forces the dealership to meet or match your current offer. This helps you walk away with the best interest rate possible. But don’t worry, you don’t have to visit multiple banks and lenders.  That’s what aggregate financers, like Car Loans Canada, are for. With one click, you can send your application to hundreds of institutions.

Pick A Few Cars To Look At

Now, you can finally start looking at cars. Before you start your search, you need to understand what you’re looking for. Take a piece of paper and list your needs on one side and your wants on the other. For example, if you only have three people in your family, you don’t really need an eight-seat SUV. Under no circumstances should you pick a car with a “want” unless it fits your budget. With that done, use one of the aforementioned sites to find a car that fits your needs. Filter by price, distance, brand, and safety features. 

Determine Your Trade-In Value

If you plan on trading in your car, be sure to research the value of your car. This will give you negotiation power if your dealer tries to undercut you. If you can’t get a good deal with your dealer, then you can consider liquidating in other ways: 

  • Sell Your Car Privately – You can use sites like Kijiji, Facebook Marketplace, and other online marketplaces to sell your car privately. 
  • Sell It to A Different Used Car Dealer – You can try selling your car to a different dealer. They may be able to offer you a better price than what your current dealer is offering. 

Complete Application

Depending on whether you choose a full service or online marketplace to purchase your car online, the application process will vary. 

Full-Service

Once you’ve been pre-approved and chosen a car you’d like to purchase, you’ll simply need to complete the rest of the application. This includes reviewing your loan agreement and e-signing it to seal the deal. Once you’ve signed and completed the application, you can have the car delivered straight to your doorstep. 

Online Marketplace

With online marketplaces, you’ll usually have to complete the rest of the application in person. However, you’ll have all the details regarding the car you want to purchase. You simply have to go down to review the bill of sale and sign any financing paperwork. Once completed, you’ll be able to drive away in your new car.  

Buying A Car Online FAQs

Why should you check your credit before buying a car online?

Financiers use your credit score to determine whether or not you should be approved for a car loan. In Canada, credit scores range from 300 to 900. Most conventional lenders need something above 650 to approve you for a car loan. If you have a history of missed or delinquent payments, your credit score may be lower than that. If so, you might find yourself stuck with a subprime interest rate or rejected altogether. That’s why it’s important to find out your credit score before you start shopping for a car. 

Can I test drive the car before purchasing the car online? 

Many of the online car-selling websites offer a free return policy.  During this period, buyers can test drive and get a feel of the car. If they don’t like it or find something wrong, they can return the car. 

Where can I buy a car online? 

There are numerous sites that allow Canadians to buy new, used and certified pre-owned vehicles. Some of the more popular ones include Canada Drives, Clutch, and AutoTrader.ca.

Can I buy a car online from a different province?

Yes, however depending on the platform you use, you may need to pick up the car in person or pay extra to have it shipped to you. 

Is it safe to buy a car online? 

Yes, it is usually safe to buy a car online, however, there’s always the risk of getting stuck with a lemon car. To help avoid getting the short end of the stick, be sure to do your research regarding the car you want to buy. Know how much the car is worth and how much you’re willing to pay for it. 

Drive Away In The Car of Your Dreams

Now that you have a better understanding of the car buying process, you’re ready to get started. Just make sure you know your credit score and have an idea of the ballpark interest rate your credit score deserves. And, don’t forget about the importance of getting pre-approved. By doing all these things, you’ll ensure you walk away from the dealership with a smile on your face.


Rating of 4/5 based on 6 votes.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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