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  • Nicholas Hinrichsen

CarGurus Is No Car Guru -- Everything Misleading About CarGurus

Updated: Mar 9

CarGurus is an automotive research and shopping website based in Cambridge, Massachusetts. They specialize in comparing local listings for used cars and new cars, as well as providing car dealership reviews. To help determine whether or not you can trust CarGurus to find your next vehicle, we have curated a comprehensive review of CarGurus, detailing aspects not disclosed on their website. Continue reading to learn more about how the platform works and find answers to the following questions:

  • Are CarGuru’s price quotes accurate?

  • Is CarGurus truly unbiased?

  • Does CarGurus offer the best financing options?

About CarGurus

CarGurus uses an algorithm to analyze and compare prices for used and new vehicles. They help buyers answer questions such as: What is my car worth? Am I getting the best deal? Is this a reputable car dealer? Additionally, CarGurus offers a discussion platform that gives car enthusiasts and auto experts a place to submit questions, offer insight, gather and share information, as well as provide reviews.

The online platform makes it easy to search for vehicles by price, features (e.g. AWD, RWD, fuel economy), body style (e.g coupe, crossover, SUV), and dealership reputation. CarGurus’ Instant Market Value (IMV) is their most notable feature that calculates the fair market retail price for a specific vehicle based on similar listings. Dealerships used to be able to post to CarGurus for free, resulting in over 5 million listings. In theory, this seems advantageous to buyers, but continue reading as we break down some misconceptions of CarGurus.

NOTE: CarGurus supports most car manufacturers: Cadillac, Ford, Mercedes-Benz, Honda, Volkswagen, Mazda, Nissan, Chrysler, Volvo, and many more!

Pricing - The Deal Indicator Is Inaccurate & Misleading

Since Instant Market Value is their most popular feature, you would expect it to be robust and reliable, when in fact we found CarGurus’ pricing engine to be wildly inaccurate. Going through the process of selling a vehicle requires the seller to provide general information like the zip code where the car is located, the make and model, year, trim, engine, and mileage. There is also an option to look up a vehicle by its VIN or license plate.

At this point, CarGurus will issue an estimate of the car’s value. Next, the seller is to add details, and this is where the tool becomes a bit unpredictable.

The IMV tool cannot account for all additional options (e.g. sunroof, active safety features) and packages (e.g. technology package, tow package), accidents, or whether the vehicle was previously used as a rental car. The application simply requests the exterior color, whereas providing the interior color is completely optional. To attract shoppers, CarGurus asks the seller (though also optional) to select additional options and packages - yet few packages or options have any impact on the overall price.

To get an idea of how reliable the IMV is, we decided to run our test cases:

  • CarGurus doesn’t account for options well: We picked two cars (Both are 2019 Audi A8’s with very similar mileage) with a HUGE difference in packages and options. Here are the comparables on CarGurus

Despite almost $15,000 in the difference in options between these two cars, CarGurus treats these options and packages almost as if they don’t matter. Instead, the cars have a very similar “deal rating” based almost purely on Year-Make-Model-Trim and mileage.

A savvy shopper would recognize that a car with 15k more in optional extras is far more valuable. But because it's very hard to get window stickers (which WithClutch can get through withclutch.com/window-stickers) or original vehicle build details then CarGurus virtually ignores these differences. If you want to quickly find out the value of your vehicle, check out our free vehicle valuation tool here!

  • CarGurus doesn’t account for the impact of an accident well: We picked two cars (once again 2019 Audi A8’s) where ONE had an accident and the other didn’t. You’d expect a car that was NOT in an accident to be significantly more valuable and considered a “better deal” if it was offered at the same price.

Instead - as you can see both of these cars are considered “great deals” and CarGurus simply compares the pricing to “market averages” for a given year-make-model-trim without consideration for vehicle history.

All else being equal, would you want a car with an accident or without? Clearly, the vehicle without the accident is significantly more valuable!

  • CarGurus doesn’t account for the additional dealership “Fees” and so the price isn’t really even the price:

CarGurus' “price” published is misleading as a whole. Every good dealership has figured out that consumers are now sorting by price - and so the number is becoming more and more meaningless as dealers try to disguise other “fees” as things other than the price.

Take this Subaru WRX listed by Shift. According to CarGurus its a “Great Deal” at a price of $22,450:

Yet a quick visit to Shift.com reveals the same car has a $995.00 “Shift Service Fee” which CarGurus “deal indicator” completely fails to take into account. Eventually, you might expect every car to be listed for $0.00 with a $23,449 “Dealer Service Fee”.

In essence - CarGurus' “Deal Indicator” is oversimplified and created by individuals without a fundamental understanding of the complexity of vehicles. Furthermore, by price sorting vehicles in the feeds, CarGurus is incentivizing dealers to hide or disguise fees into something “other than price” so they still show up at the top of rankings.

What Does CarGurus Say About Their Own Under-Informed IMV?

There’s a FAQ section regarding the calculations of the IMV that include the following questions:

  1. How is my vehicle’s value calculated?

  2. Where does the suggested pricing come from?

  3. Why is my IMV lower than KBB/similar cars on CarGurus?

CarGurus states estimated values are a result of analyzing over 6 million cars. Factors they compare are make, model, mileage, features, and other characteristics. In terms of where the suggested pricing comes from, CarGurus’ new listings are based on deal rating. Great and Good Deals show up first in the results, and the suggested price falls slightly below IMV, which is the highest price within the “Good Deal” rating. “Good” and “Great” deals are normally within a certain number of standard deviations of price.

Is CarGurus Biased?

CarGurus prides itself on providing unbiased, transparent price data to help buyers make smart financial decisions when it comes to purchasing their next vehicle. They back this claim by stating that dealers can’t pay for their cars to appear higher in the search results. While this may be true, it only holds up to an extent. Diving deeper into the CarGurus about page and under the heading “Free Search & Listing Tools”, is the following statement: “If interested, dealers can pay for subscription services that offer more opportunities to market their dealership and connect with our industry-leading audience of shoppers”. While dealerships can list their vehicles for free, the subscription model suggests that by paying the fee they have better marketing opportunities, and gives the impression that their platform could be biased towards subscription users.

Another thing to consider with CarGurus is that dealer reviews aren’t based on any objective data, and only reflect a subset of random consumers and their opinions. A five-star rating with the comment, “helpful” has the same weight as a five-star rating where a buyer detailed their experience to the fullest extent. This applies to negative reviews as well, and there is no telling whether or not the claims made are verified or accurate. Furthermore, most of the reviews are based on the “experience of contacting” rather than the “experience of buying” yet these reviews all hold equal weight.

Finally, dealers that sell salvage, bad condition grade, and accident cars can still be "well-reviewed" even though they sell vehicles that many consumers won’t consider.

CarGurus Fees and Costs

Fees and costs paid to CarGurus are very straight forward. To list a vehicle as a private seller it will cost $4.95. In the event the sale of the vehicle goes through, the seller will be charged a fee of $99. There is a data point suggesting that only sellers who process the sale through AutoPay are charged the $99 fee, and vehicles sold via other channels have not been assessed any other expenses.

Does CarGurus Offer Financing?

CarGurus offers financing through a limited number of financing partners. Their lender network consists of Westlake, CapitalOne, and Global Lending Services. Each of these financial institutions is a for-profit banks. As a buyer, borrowing from a for-profit bank is a critical error to avoid if possible. Financial institutions such as these charges the highest interest rates to ensure they can still collect a profit. It would be ideal to get financing from a not-for-profit organization such as a credit union. Credit unions are member-owned, cooperative institutions that exist to provide their members with a place to save and borrow at reasonable rates.

IMPORTANT: CarGurus has created a dedicated page to answer all questions regarding COVID-19. Head over to Buying a Car During Coronavirus or their social media pages to learn more about how they are handling the pandemic.

Bottom Line

If you're deciding whether or not to use CarGurus for your car search, be sure to do your due diligence and consider other car retail companies. Request to test-drive vehicles you're interested in, and make sure to get your dealer's phone number and call ahead of time so you don't miss out on your next dream car. Many CarGurus users have claimed the cars they expressed interest in are no longer available when they show up to check out the vehicle. To inform you more about other online car vendors, WithClutch has put together articles on Carmax, Vroom, and Shift from both a seller and buyer experience perspective.

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