Traditional, online, or rental: Which dealer type offers best used-car deal?

Used-car prices are up. Consumers have multiple sources to choose from for buying a used car. In that environment, consumers should examine all their options when trying to save money and find the best deal on a used vehicle.

To help, car search engine iSeeCars.com conducted a study analyzing more than 8.5 million used-car sales across the three dealer types: traditional local dealerships: virtual dealerships, and rental car companies.

The result? iSeeCars found the greatest savings — with an average of 1.6%, or $303 — came consistently from rental car dealers. The study found that local dealerships are priced close to market value.

Virtual dealerships, the study found, are priced above market value.

“Because rental car companies buy their cars at a high volume and at a discounted rate, they’re able to sell these vehicles for less to consumers, and they price the vehicles to sell in order to move their inventory quickly,” iSeeCars executive analyst Karl Brauer said in a news release.

Brauer continued, “Additionally, rental car companies are also more likely to discount their vehicles given the financial hardships they are facing from the COVID-19 pandemic.”

Popular vehicles: The best places to buy

To determine the average savings at each major dealership type, iSeeCars analyzed used car transactions among the top 25 best-selling vehicles.

Of those 25, 13 have the greatest savings at rental car agencies. Brauer said more than 98% of used-car inventory at rental car companies is three years old or newer.

“So these deals will only apply to shoppers looking for newer-model-year versions of these vehicles,” Brauer said.

Six vehicles on the list are not commonly offered by rental car agencies. Those include the GMC Sierra 1500, the Honda Accord, the Honda CR-V, the Jeep Wrangler, the Subaru Forester and the Subaru Outback.

Brauer said that although those vehicles are still sold at rental car companies, the frequency and choice will be limited.

Six vehicles commonly found across all three retailer types do not have the most significant savings at a rental agency. Brauer noted that the Ford Escape shows the most savings virtually. Although the Ford Fusion and Hyundai Tucson are priced above market value at all three dealership types, they have the smallest increase at local dealerships, he added.

On average, he said consumers are most likely to find deals on the Mazda CX-5 at traditional local dealerships, “while the Toyota Corolla and the Toyota Tacoma have the lowest increases above market value,” he said.

Rental Agencies: These are the best popular cars to buy

iSeeCars studied which popular vehicles show greater-than-average savings at rental car companies. iSeeCars also determined the average price discount for each vehicle.

The Chevrolet Silverado 1500 pickup truck is the vehicle with the greatest savings at rental car companies. That vehicle showed a 6.6% savings at rental car companies, amounting to $2,016.

“With truck demand particularly high over the last several months, it can be tough to find a good deal. Consumers looking for a late-model, full-size used truck should consider local rental car sales inventory,” Brauer said.

Two popular sedans also offering strong savings when consumers purchase through a rental car dealer are the Honda Civic and the Nissan Altima.

Brauer said that although sedans have seen an overall decline in market share, those models are still popular rental options. Through a rental car dealer, consumers can save money on these vehicles.

In addition to savings, other benefits of buying a used rental car include that rental cars follow routine maintenance schedules, Brauer said. They also undergo routine inspections for cosmetic damage, he added, noting that all Hertz and Enterprise vehicles see a strong inspection process from certified mechanics. Those vehicles come with a 12-month/12,000 mile limited powertrain warranty, he said.

But even with the benefit of savings, buying from a rental car company has its limitations. Those vehicles can have higher mileage and more wear and tear. That is because many rental car drivers might not be as careful with the vehicle as they would be with their own car, Brauer said.

“Rental companies also typically buy the base model of a vehicle, so consumers who want higher trim levels may have difficulty finding the specific version they want,” Brauer said.

Online dealers: The best popular cars to buy

The average used car is priced 2.4% above market value at online dealerships.

But iSeeCars says three popular vehicles sold online offer discounts below market value. Those popular vehicles show the greatest average savings when purchased at an online dealership. They are the Ford Escape, the Chevrolet Equinox, and the Jeep Grand Cherokee.

Generally, the savings at online dealerships are not as significant as at rental car companies, Brauer said.

“But consumers should consider online dealers if they want a slightly older vehicle with relatively low mileage, or if there isn’t a rental car sales company in their area,” he said.

Brauer continued, “Additionally, online dealerships typically sell off-lease, one-owner cars, and Carvana and Vroom only sell vehicles with clean vehicle histories that haven’t been in an accident.”

Online dealers offer the convenience of delivering a vehicle right to a shopper’s door. They also thoroughly inspect their vehicles and offer free protection plans, according to iSeeCars.

Consumers not satisfied with their vehicle have a five- to seven-day return window, which Brauer said can help ease anxiety about not being able to test drive the vehicle prior to purchase. 

But challenges also exist with the process of buying from an online dealership, including the fact that customers can’t do a traditional test drive. Also, the dealers use no-haggle pricing, which leaves no room for negotiation, Brauer said.

Local dealers: The best popular cars to buy

In also looking at the sale of popular vehicles at traditional local dealerships, iSeeCars found the average used car is 0.2 percent above market price at these dealerships, or “essentially equal.” But 10 popular vehicles sold locally offer savings below market value. Those popular vehicles provide the most savings when a customer purchases from a traditional local dealer. They include the Subaru Outback, Subaru Forester and Mazda CX-5.

“Traditional dealerships have more inventory than online dealerships and car rental agencies,” Brauer said.

He continued, “Shoppers looking for a specific vehicle in a certain color or trim will find more variety at these dealerships. Additionally, traditional dealerships devote more of their inventory to older vehicles, making them the best option for consumers seeking vehicles more than 5 years old.”

Consumers buying a used car from any type of dealer should always conduct research and follow steps “to make sure a good deal isn’t too good to be true,” iSeeCars wrote.

Brauer promoted iSeeCars’ VIN check report and other online tools, which he said provide information to help consumers find the best car at the best price. Vehicle buyers, he said, should obtain a vehicle history report and get an inspection by an independent mechanic.

Best places to buy a used car

Data from: iSeeCars.