With GM's announcement that it will begin selling new cars directly to buyers online through powerhouse auction website eBay, in conjunction with its 225 California-based dealerships, consumers may now more seriously consider buying a car online. While eBay is already in the car-selling business - its automotive marketplace eBay Motors is ranked by Nielsen Ratings as the #1 online automotive site - this marks the first time a car manufacturer has sold new cars directly to the general public online. The test program will run from August 11 to September 8 and, if successful, will expand nationwide. (Find out what to consider before taking a ride with stocks from this industry in Analyzing Auto Stocks.)

Driving Sales Online
This is a bold attempt that's part of a larger plan aimed at helping the beleaguered car manufacturer successfully emerge from bankruptcy. GM is slashing its total number of dealerships by 40% by the end of next year; this internet-based experiment may provide the company with a valuable (and less expensive) way to reach a larger buying audience.

The company will list more than 20,000 new Buick, Chevrolet, GMC and Pontiac cars on its website, and will feature options enabling consumers to compare prices across models and dealerships, apply for financing and either "buy it now" at the listed price or negotiate with the dealer for a lower price. (Find out how much hitting the road will REALLY set you back, in The True Cost Of Owning A Car.)

The move is a smart one for GM, given that more than 75% of new car buyers went online to do research before buying, according to J.D. Power & Associates, and 30% of all car purchases are now taking place online, according to Edmunds.com. If you are considering buying a car online - from GM through its eBay website or through another seller - here are some tips to help ensure you don't get taken for a ride:

#1 - Verify the Seller's Credibility
Check the seller's history with the Better Business Bureau, or read ratings from other sellers to ensure you're working with someone who will deliver the car according to the terms you are offered.

#2 - Get More Information
If you have questions, email the seller for additional information on the listed car including photographs (of the interior and exterior).

#3 - Get an Auto History Report
If you're buying a previously-owned car, get an auto history report through a vendor.

#4 Test-Drive the Car
Go out to the lot, or arrange to meet the seller in person at a safe location, to test-drive a model of the car you're considering to see if it's really comfortable and drives the way you'd like.

#5 - Compare Prices
Research prices on the car you're considering through other competing online sites. Those sites will give you an idea of the sticker price as compared to the invoice price (the amount that the dealer paid for the car). If you're buying a used car check the Kelley Blue Book value to know the average price for what consumers are paying for the car you're considering.

#6 - Check for Incentives
Just because you're buying online, you don't want to miss out on any potential manufacturer incentives. Call your local dealership for potential dealer-based incentives (in case they're not advertised online) or visit the manufacturer's website to learn about national promotions.

#7 - Get the Best Financing. If you need a loan to purchase the car, compare the dealer financing you're offered online with rates and terms available for a car loan through the bank you're currently using or a local credit union.

#8 - Get it Inspected
Have an independent mechanic inspect the car in person (if you're buying locally) or at least review the pictures and information provided online.

#9 - Confirm That the Deposit is Refundable
Find out if the deposit is refundable in the event that the vehicle is sold to another consumer, and print out any online records including emails to verify your transaction.

#10 - Make a Secure Online Payment
If you're buying online, or even just making a deposit, use your credit card to get limited liability in the event of fraud (i.e. the seller doesn't provide the car you intended to purchase).

Use the internet to your advantage when searching for a new or used car, and save yourself some valuable time – and perhaps money – in the process.

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