Why CarMax Makes More Money on Used Cars Than Anyone Else • Hacker News Board

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#81

Post by nitwit005 » Sun, Jun 03, 2018, 7:54 PM UTC

aphextron wrote: post #60

drblast wrote: post #55

They 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…

I went to such a store, couldn't believe the prices and number of salesmen. I literally walked across the street and was shown something half the price, and when I asked for something cheaper, they showed me something cheaper.

The lesson I learned was to never buy something from a brand you hear constantly on the radio. You'll end up having to pay for all that advertising.

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#82

Post by rconti » Sun, Jun 03, 2018, 8:29 PM UTC

ouid wrote: post #61

goatherders wrote: post #40

Earlier 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?

I've got a car for sale right now for $31k. It's not listed widely (just an enthusiast forum) and I've had a couple nibbles after about a month, one guy test drove it and seems really interested.

I also just changed the oil and am considering changing the differential fluid.

I've already put multiple hours into listing, uploading pictures, meeting the guy to test drive, responding to texts, phone calls, etc.

Because of the relative value of the car, I intend to meet the buyer at the BUYER'S bank to do the paperwork and see the cashier's check drawn in person (there are lots of cashier's check scams these days).

Assuming I sell it to the interested buyer, it's a fairly conservative estimate to say it'll take me 6-8 hours with the one buyer. If I list it more widely on, say, craigslist, I get to deal with finding time to meet a bunch of tire kickers, THEN finding the time off work or on a saturday morning to go to the bank to do the transaction.

In California, if the vehicle is 5-6 years old or more, the seller is also responsible for getting the car smogged; likely if you took it to a CarMax type place they'd take care of all of that stuff for you (just a guess though).

In the end, I am LIKELY to make, say, $5k over what a dealer would offer me, but there's no way of being sure that I'll get 1 cent over what a dealer would offer.

Ultimately it depends on the market. I only buy fairly unusual cars; my previous car took me 4-6 months to find, the car I'm selling took 4 months to order. I once took 6 months to sell a purple M3.

Done right, enthusiast cars hold their value well, but the target demographic is smaller so they take longer to sell.

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#83

Post by Shelnutt2 » Sun, Jun 03, 2018, 9:01 PM UTC

nosequel wrote: post #20

Carmax 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 had the same experience earleir this year. I had a 2012 Mini Cooper with 50k miles on it. KBB dealer trade in was $6k, private sale $8k-10k. Carmax offered me $2k for the car. They showed me the KBB "instant offer" that was for $1.8k.

I have since sold the vehicle in private sale. I would have taken $6k +/- from Carmax to sell it on the spot.

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#84

Post by hunter2_ » Sun, Jun 03, 2018, 9:14 PM UTC

Obi_Juan_Kenobi wrote: post #76

matt-attack wrote: post #64

Earlier quoted context omitted.

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…

It's true: with haggling, the buyer is at a disadvantage if they don't have the time to gather information. But isn't that like with supermarkets, where the buyer is at a disadvantage if they don't have the time to clip coupons? In both cases, the point is to let people who have more money but less time subsidize people who have more time but less money, so that everyone can obtain the goods even if they don't quite pay the average price required to keep the business afloat. I should think that if you're against one of these tactics (haggling), you should also be against the other (clipping coupons). Curious if that's the case.

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#85

Post by wil421 » Sun, Jun 03, 2018, 9:18 PM UTC

ouid wrote: post #61

goatherders wrote: post #40

Earlier 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?

For us deal hunters the thrill is in the hunt as much as the purchase. Recently bought a new car for 7k off MSRP. I live in Georgia and found the exact model in Virginia. I only told them about the Virginia offer at the very last second. Had the offer printed out and in hand.

All this being said I likely won’t buy a used car again. My 3 other cars were all used.

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#86

Post by hunter2_ » Sun, Jun 03, 2018, 9:26 PM UTC

BeetleB wrote: post #54

>CarMax is an absolute powerhouse when it comes to pre-owned vehicle retailing. I never understood the use of the phrase "pre-owned". I know it's short for "previously owned", but why not say "used"? My brain keeps parsing it as "before it is owned". And does anyone use this outside of the US/Canada? The other day I went to an event where the check-in clerk asked "Are you pre-registered?" I asked "Is that different f…

https://www.youtube.com/watch?v=vdPy5Ikn7dw#t=1m30s

https://www.youtube.com/watch?v=9OY55Mqs4BI#t=5m40s

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#87

Post by jlelonm » Sun, Jun 03, 2018, 9:28 PM UTC

unstrafed wrote: post #72

drblast wrote: post #55

They 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).…

What's the argument for state inspection being a "glorified protection racket"?

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#88

Post by vvanders » Sun, Jun 03, 2018, 9:36 PM UTC

unstrafed wrote: post #78

ouid wrote: post #61

Earlier quoted context omitted.

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…

One trick with dealers is to never mention a trade in until you're almost at the end(or defer discussions about it). That way you leave open the option to leave the trade-in out of the deal and force them to give you a number without it factored it.

Also, never do the 4-box and have your financing sorted out up-front if you're not doing cash. Any chance they get to adjust more than one number is when they'll adjust the terms in their favor.

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#89

Post by pkaye » Sun, Jun 03, 2018, 9:40 PM UTC

aphextron wrote: post #60

drblast wrote: post #55

They 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…

We ended up finding a local place where they manufacturer the foam mattresses in-house. Rather than pick and choose which model you like, you pick among options. There are 3-4 firmnesses. You can choose the firmness on each side of the bed. You can choose thickness of the mattress. You can choose exterior quality also. In the end the finished product looks as good as the major manufacturer and costs half the amount. They also get it ready and delivered in 2-3 days.

Re: Why CarMax Makes More Money on Used Cars Than Anyone Else

#90

Post by commandar » Sun, Jun 03, 2018, 10:09 PM UTC

unstrafed wrote: post #72

drblast wrote: post #55

They 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).…

>Calculating taxes is a giant pain

Depends on the state. In Georgia, you can go to the Department of Revenue's site, punch in a VIN or year/model of a car, and get the exact ad valorem that would be due when buying a car. It makes it pretty trivial to figure out what your ballpark out the door price should be before you even start negotiating and avoids letting the the dealership make negotiations revolve around monthly payments.

I have my issues with how Georgia does AVT -- it's paid on any car when first registered in the state, including a car you already own when moving in -- but it's kind of ridiculous that at least being able to easily know what the state is going to charge you isn't standard across the board.