Why do people pay $100+ for Windows/Office when linux/Libreoffice is free? One takes a lot less effort than the other.
Why CarMax Makes More Money on Used Cars Than Anyone Else
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Re: Why CarMax Makes More Money on Used Cars Than Anyone Else
#72They can make money because used car dealerships are an anachronism run by sales morons who are hoping to find a bigger fool to siphon money off of. Interacting with a car dealership feels like you're walking into a poker game with "sucker" stamped on your forehead. I recently tried to buy a barely used Lexus from a Lexus dealer and couldn't believe they used the same bullshit New Jersey Pontiac dealer tactics to sel…
You'd be surprised how much "old boy network" stuff is involved in used cars. Calculating taxes is a giant pain (and no one except CarMax has even solved this problem as far as I can tell). Some states have extremely draconian laws, especially those relating to the environment (which are arguably in the public's interest) and those relating to state inspection (which are arguably just a glorified protection racket). Not to mention, having a full lot with reliable used cars is quite capital intensive. And a used car company needs pretty solid knowledge about which cars to actually turn around and which to dump, so they don't actually sell a lemon to retail consumers.
Re: Why CarMax Makes More Money on Used Cars Than Anyone Else
#73Carmax makes a ton of money because they bring new meaning to "low-ball" when they offer to buy your car. Go see what they'll offer you for a car just as a test, then go look up your car value on KBB, edmunds, anything. When I sold my last car, they offered me $2k and I ended up selling it the next week for $7k. Carmax goes after people who are either too lazy to sell it themselves or too desperate and need the money…
Not sure this is true. This is just a single data point, but a couple years ago I tried to sell a relative's car. CarMax offered more than the dealer did.
You can nearly always get more money for your car selling it directly to an interested buyer, of course, but when comparing CarMax to traditional dealers, they seem to be on par or better.
Re: Why CarMax Makes More Money on Used Cars Than Anyone Else
#74Why do people pay $100+ for Windows/Office when linux/Libreoffice is free? One takes a lot less effort than the other.
My experience has been that Libreoffice tools are significantly easier to use than MSFT Office products, and also easier than Google Docs and related Google enterprise products. It has usually just been the case that a company has many employees already standardized on Windows machines, and wants enterprise support contracts.
I'd argue that Libreoffice being harder to administer and provide as a common tool is due to mistakes made earlier in the decision-making process, when originally standardizing on Windows or expecting browser-based solutions for these workflows.
But I agree that conditional on someone already having sunk money into those mistakes, the marginal extra cost of a turn-key solution for their environment is what makes the enterprise products attractive.
Re: Why CarMax Makes More Money on Used Cars Than Anyone Else
#75Earlier quoted context omitted.
Your time is worth more than what, exactly? How many hours of work is worth an extra $1000?
...Maybe, if you find the right buyer, after you publish address to and meet with who knows what sort of people, and possibly deal with scams that will try to rip you off of the entire value of the car and possibly more... There's more than just minutes spent in dealing with private-party sales.
There is no guarantee of market efficiency for single sellers, and while you aren't being explicit about it, I suspect that your belief that people are rational about selling their vehicles rests on a view that this markets efficiently determine price.
Forgive me for inferring too much from your statement if I am, but this is exactly the kind of situation in which the zero arbitrage principle doesn't apply. if I make a bunch of offers to buy a car for less than it's worth, then all I need to do is find one person who is selling that car and not shopping around. There's no reason to expect any market forces to govern that transaction at all.
There is no reason to believe that selling your car for whatever the first person you find offers is likely to give you a fair price.
Re: Why CarMax Makes More Money on Used Cars Than Anyone Else
#76Carmax makes a ton of money because they bring new meaning to "low-ball" when they offer to buy your car. Go see what they'll offer you for a car just as a test, then go look up your car value on KBB, edmunds, anything. When I sold my last car, they offered me $2k and I ended up selling it the next week for $7k. Carmax goes after people who are either too lazy to sell it themselves or too desperate and need the money…
Exactly. This is a point the article misses. I do believe they mark up the sale price similarly, but probably make even more margin on underpaying for their inventory. Separately, I find it ironic that the term "no haggle" has been now socialized to mean "buyer friendly". Certain segments of the population have fallen for it, hook, line and sinker. In reality the notion that they refuse to haggle (i.e. refuse to lowe…
No haggle, if genuine, means that there's less information asymmetry between buyer and seller.
A buyer can look at a variety of places and see real prices, and thus have a gauge of the market. If everything is a negotiation, you'd have to invest considerable time negotiating the 'true' values, or else estimating based on general market knowledge. In either case, the buyer has to work much harder to gather information about the market.
A reduction in information asymmetry should work strongly in the buyer's favor relative to the old system.
Re: Why CarMax Makes More Money on Used Cars Than Anyone Else
#77Carmax makes a ton of money because they bring new meaning to "low-ball" when they offer to buy your car. Go see what they'll offer you for a car just as a test, then go look up your car value on KBB, edmunds, anything. When I sold my last car, they offered me $2k and I ended up selling it the next week for $7k. Carmax goes after people who are either too lazy to sell it themselves or too desperate and need the money…
I was a CarMax "IT associate" once upon a time.
First, CarMax itself is a great company and they do good work. I'd recommend them to anyone who is either not a good negotiator or who can't afford to invest in the typical car market activities.
As other commenters have mentioned, the two major variables that matter to CarMax are the age and number of miles. CarMax will buy literally any car. For almost any vehicle, CarMax will immediately put it in the auction lane whenever it has more than 100k miles or is over 10 years old. In fact, a lot of their employees ("associates") would make a game of finding an older car with low mileage that they could snap up with CarMax's associate discount.
As the article mentions, CarMax makes on average $2k gross profit per (retail) vehicle. CarMax wants to move inventory quickly, just like any normal retail operation (including its deceased parent company Circuit City). If a vehicle is priced too high, its price will be reduced until it can sell. Thus, CarMax attempts to minimize any unforeseen problems that may occur during the reconditioning process, as these can make the cost (to CarMax) balloon out of control. I honestly wish I could say more about the strategy and analysis that CarMax puts into this. It's truly remarkable to behold.
So, yes, you can sometimes get much more for a vehicle on the open market if (1) you've got a car that's outside the parameters of what CarMax puts on the front lot and (2) you're willing and able to negotiate for a private sale.
Re: Why CarMax Makes More Money on Used Cars Than Anyone Else
#78Earlier quoted context omitted.
I sold my truck last week to them for 16200. KBB online "instant offer" was 18k. I went to the dealership that KBB directed me to and their official offer was 13000. The salesman told me KBB's offer wasn't official and was just meant to get me to their lot. So I went back to carmax and sold it for the 16200. I might have gotten a bit more on Craigslist or eBay but my time is worth more than that. Whole transaction to…
Your time is worth more than what, exactly? How many hours of work is worth an extra $1000?
Apart from CarMax, there are essentially two routes for selling a vehicle. The first is a private sale, which basically involves taking on a temporary, part-time job to have people meet you, test drive your car and then negotiate for the correct price. Craigslist makes this easier, but it's still intense. I'd love to see hard data on the amount of effort involved in private sales, but from anecdotes from friends who have done it, a person can easily invest tens of hours in attempting to get the vehicle sold on the market. That adds up to $1k fairly quickly. Private sale makes the most sense as a hobby. (I'll note that some startups like CarLotz exist that basically have a consignment model for private sales that may work slightly better in certain circumstances.)
The second route is the "trade-in." Most dealers almost never pay cash for the amount of money that they offer for trade-in. It's purely a negotiating tactic meant to make a buyer feel better about a (relatively arbitrary) price on a car ("$14k for a 2015 Ford Focus is kind of high, but we really like that we're getting $4k for our 2007 Pontiac Aztek!"). Whenever you work with a dealer, you're almost always getting fleeced. Again, some people enjoy the process as a sort of game or hobby, but you're likely not making a profit unless you're extremely good at it.
EDIT: I read this over and it sounded a little fanboyish. I want to make clear that I've been gone from CarMax for almost 5 years and I don't own stock or have any other financial stake in their success other than some friends who are still employed there. I just think they're a good company (although I didn't love working in IT).
Re: Why CarMax Makes More Money on Used Cars Than Anyone Else
#79Carmax makes a ton of money because they bring new meaning to "low-ball" when they offer to buy your car. Go see what they'll offer you for a car just as a test, then go look up your car value on KBB, edmunds, anything. When I sold my last car, they offered me $2k and I ended up selling it the next week for $7k. Carmax goes after people who are either too lazy to sell it themselves or too desperate and need the money…
Exactly. This is a point the article misses. I do believe they mark up the sale price similarly, but probably make even more margin on underpaying for their inventory. Separately, I find it ironic that the term "no haggle" has been now socialized to mean "buyer friendly". Certain segments of the population have fallen for it, hook, line and sinker. In reality the notion that they refuse to haggle (i.e. refuse to lowe…
You see it as people being suckers, I see it as not having time to fuck around with shady dealer tactics, Craiglist joyriders and tire kickers.
Sometimes you don't have 20h+ to dedicate to those shenanigans. In that case if CarMax comes within some Delta of KBB/etc I fail to see how that's "anti-consumer".
I've sold cars pretty much all different ways and found CarMax's proposition to be pretty reasonable.
Re: Why CarMax Makes More Money on Used Cars Than Anyone Else
#80They can make money because used car dealerships are an anachronism run by sales morons who are hoping to find a bigger fool to siphon money off of. Interacting with a car dealership feels like you're walking into a poker game with "sucker" stamped on your forehead. I recently tried to buy a barely used Lexus from a Lexus dealer and couldn't believe they used the same bullshit New Jersey Pontiac dealer tactics to sel…
>The only easier industry to disrupt is probably furniture or mattress sales. I walked into a mattress store recently, and was absolutely horrified. It's very obvious what their tactics are. The sticker price on everything was easily 3x what the cost of a decent bed/mattress should be, to the point it was obvious none of the clientele in there would be paying that full price upfront. They only talk about everything i…
Buying a mattress is aggravating, but my experience has been rather different. Maybe I went to different types of stores, I don't know. I did notice that each store/chain seems to sell very similar mattresses that are somehow technically different models so you can't directly compare prices.
First mattress I bought had a sticker price of I think $850 plus tax. Ended up haggling and paying $550 cash (tax included) for the mattress with a cover included.
Second mattress I bought had a sticker price of around $2800. Haggled down to $900 after tax again with a cover included. It was significantly better than the first one.
Both were queen sized, included delivery and offered haul-off.