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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

#91

Post by mandeepj »

ryan-c wrote: post #80
aphextron wrote: post #60

Earlier quoted context omitted.

>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…

>Second mattress I bought had a sticker price of around $2800. Haggled down to $900 after tax again with a cover included.

You have great negotiation skills

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

#92

Post by mandeepj »

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 ended up selling it the next week for $7k

Did you sell it to an individual?

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

#93

Post by nradov »

jlelonm wrote: post #87
unstrafed wrote: post #72

Earlier quoted context omitted.

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"?

The usual argument is that it's just a waste with no safety benefit. Some states that previously required annual inspections have eliminated them, and traffic deaths per mile driven haven't increased.

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

#94

Post by aventrix »

unstrafed wrote: post #77
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 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, Ca…

CarMax was originally created under Circuit City? I had no idea! Interesting that they were able to succeed when CC crashed so hard.

Today I also learned, via wikipedia, that Circuit City is attempting a comeback.

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

#95

Post by nradov »

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…

Private sales are generally fairly easy if you have a normal, common car selling for under about $7000 (depending on location). A lot of people can scrape together that much cash. But more expensive vehicles take a lot longer to sell. The buyers are more picky, and most of them need some form of financing which complicates the sale.

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

#96

Post by kbutler »

bittercynic wrote: post #70
kbutler wrote: post #63

Earlier quoted context omitted.

...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.

Accepting those risks and developing the confidence to buy and sell stuff yourself can be pretty profitable, and and comes with a sense of independence that can be very valuable.

...and you can do it a lot and have a profitable hobby of buying and selling cars, unless you'd rather spend your time on other things.

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

#97

Post by unstrafed »

jlelonm wrote: post #87
unstrafed wrote: post #72

Earlier quoted context omitted.

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"?

In certain states, the number of permits to perform state inspections is capped. New entrants who want to perform inspections (which a used car dealer will typically need to do) have to either wait in line indefinitely or buy up an existing permit-holder.

State inspections may improve vehicle safety at the margin. However, when state inspection permits are treated like taxi cab medallions, the cost-benefit comparison becomes a bit skewed.

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

#98

Post by unstrafed »

commandar wrote: post #90
unstrafed wrote: post #72

Earlier quoted context omitted.

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 mont…

Yes, of course it depends on the state. CarMax operates in 41 states.[1] Given that some customers are known to cross state lines in order to purchase vehicles, CarMax likely calculates taxes for every state except Alaska and Hawaii. In some states, the tax rules are arcane enough that they depend on the municipality as well.

1. https://www.carmax.com/stores

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

#99

Post by kbutler »

ouid wrote: post #75
kbutler wrote: post #63

Earlier quoted context omitted.

...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…

I think you're reading way too much into it.

I'm basically speaking from personal, anecdotal experience selling (and buying) a few low-end cars via Craigslist and equivalents.

I have other things I'd rather do with my time than either handle a bunch of prospective buyers inspecting, test driving, and low-balling my car (and dealing with potential fraud), or myself inspecting, test-driving, and low-balling other people's cars, even though that may be a way to save/earn some money.

From an economics point of view, the transaction costs are significant (even if not dollar-denominated), so the arbitrage opportunity exists for someone who can minimize or simply disregard those costs.

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

#100

Post by someguydave »

chrisseaton wrote: post #5
xivzgrev wrote: post #2

There's value in removing negotiations to end consumer. The expectation to negotiate can introduce stress and uncertainty into an already-stressful large purchase. CarMax removes that, and captures the value in higher prices. But it is interesting that more people don't do a quick check of Kelly Blue Book. For example BMW 328i in article at Carmax is $27k. On KBB selling to private party value is $21k-$23k. Maybe the…

A lot of people are probably happy to pay the premium to avoid the relative uncertainty, risk and awkwardness of a private sale.

Not only that, CarMax will support you if the car turns out to have problems. Try getting that when you are curbstoning
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