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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 tes

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 immediately.

csours 8y ago
Completely agree with user cstejerean here. You didn't say anything about your car, but I will hazard a guess that it was over 10 years old, but still a somewhat rare or desirable vehicle. Carmax doesn't want vehicles over 10 years old. Also, to other commentors here, consider tax implications when you compare sale price on a trade-in. If you wind up paying taxes on the sale of your vehicle, that may offset the increase in price on a private sale.
- jjnoakes 8y ago
  Don't buyers pay the sales tax?
  - csours 8y ago
    It appears that I had an incorrect assumption: https://www.dmv.org/articles/income-tax-implications-of-selling-a-used-car/ https://www.dmv.org/articles/income-tax-implications-of-sell... Note that this is not an official DMV site for any government organization
  - hellogoodbyeeee 8y ago
    When you buy a used car, you pay sales tax on the purchase price less the value of your trade in. So effectively, you need a private sale offer of at least the sales tax rate higher than the trade in offer to break even. Sales tax wouldn't come in to play if you just sold your car to Car Max though.
craftyguy 8y ago
That's a classic used car tactic, and it's amazing how folks still become fixated on the price they'll be able to buy something for without realizing the price difference will come from the amount they receive from their 'trade-in.'
- duxup 8y ago
  Trade in, also financing.
  - craftyguy 8y ago
    Oh yea, definitely that too. Though it requires a bit more than subtracting two numbers to figure out you're being taken advantage of, so it's less obvious for folks who haven't done math in decades (more people than you think).
illumin8 8y ago
This is spot on. They offered me $6500 for my car, which was way below blue book. I sold it on Craigslist for $9700 a few days later.
- cstejerean 8y ago
  You will always be able to get more money on a private party sale than trading into a dealer. Did any other dealership offer you more than $6,500?
  - illumin8 8y ago
    Yes, another dealership offered me $7500. CarMax was by far the low ball offer.
    - goatherders 8y ago
      The difference of 800 for a car in that price range is far from significant.
      - praneshp 8y ago
        What? It's 10%, and definitely non-trivial.
- bdcravens 8y ago
  Of course they won't give you private sale value; they're buying it to resell.
cstejerean 8y ago
If Carmax offered you 2k then the car you were trading in was not something they were interested in, so they probably offered you what they could get at auction for it. There are certain things for which you don’t want to use carmax. Also, did you sell it private party for $7k or was that at another dealership? I’ve bought and sold a decent number of cars over be years and carmax has routinely offered the best price I could get from any other dealership, but it depends on the specifics. I may trade in my heavily modified Jeep Wrangler next and that’s not something I would bother with carmax for. They don’t generally sell modified 4x4 rigs, so they’re likely to flip it at auction and therefore make a lowball offer. So I’m going to go to a dealership that specializes in what I’m selling.
goatherders 8y ago
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 took less than an hour.
- ouid 8y ago
  Your time is worth more than what, exactly? How many hours of work is worth an extra $1000?
  - kbutler 8y ago
    ...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.
    - bittercynic 8y ago
      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.
      - kbutler 8y ago
        ...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.
    - ouid 8y ago
      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.
blhack 8y ago
Car dealers don't use Kelly blue book, they use either black book or "MMR" (Mannheim market report).
- crb002 8y ago
  You can go to Mannheim and see auction results from the previous weeks and see what your vehicle is going for. Print it out when you go in, they are saving the $500-$1000 cut Mannheim takes.
larsiusprime 8y ago
This is just anecdata. We bought a used car at Carmax and they gave us way, way, way above bluebook value for our trade-in (and all other offers, too -- and we were pretty aggressive in researching trade-in offers at other places and were prepared to be underballed by Carmax). My anecdata is no more useful than yours. Unless someone provides some actual reliable data points to produce a real, known trend, there's no proof here.
- ydt 8y ago
  My experience was similar. I sold a 2006 to them that had major visible rust issues. The KBB was 1650, they gave me 1600. I was surprised they bought it at all to be honest.
- matt-attack 8y ago
  Since we're telling anecdotes, I brought in a 1999 Honda Prelude back in 2005. They offered me $6k. I sold it on eBay for $11k.
- argonaut 8y ago
  A trade-in is not the same as an actual sale for cash. If you indeed got a great deal on the trade-in it just meant you got less of a great deal on the other components of the sale.
  - fma 8y ago
    As far as I know, CarMax doesn't negotiate on the price. The price they list is the out the door price. So it's not like OP walked in and they added document fews and headlight fluid fees. He knew the price he was going to pay for the CarMax car, and was pleasantly surprised with the trade in value of his old car.
crb002 8y ago
Greed goes both ways. Tempted to haggle with them knowing their fat margins, especially near end of quarter when salespeople are focused on cashflow now not profit next quarter.
matt-attack 8y ago
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 lower our prices) should be viewed as anti-consumer. At least that's how I take it. I'd never, in a million years, buy something that high in price where the price couldn't be negotiated. Lastly, the article [1] that's linked to in OP's article is actually more fascinating in my opinion. It describes a California court ruling against CarMax's inspection policy and how it violates 2006 California Consumer Protection statutes. Pretty interesting. [1] https://jalopnik.com/california-court-says-carmax-certification-violates-con-1788101655 https://jalopnik.com/california-court-says-carmax-certificat...
- mgkimsal 8y ago
  > In reality the notion that they refuse to haggle (i.e. refuse to lower our prices) should be viewed as anti-consumer Lowering prices isn't the same as haggling. Haggling is going to see some salespeople lowering the price more or less for some people vs others, and open them up for a massive discrimination class action lawsuit.
  - matt-attack 8y ago
    > salespeople lowering the price more or less for some people vs others Agreed. Why must that naturally lead to the idea of discrimination? If I'm selling a car privately, and a buyers arrives and agrees to pay my full asking price, have I discriminated against him, even though I know secretly I would have taking $1k less than asking, had he merely asked?
    - mgkimsal 8y ago
      if you're a larger company, defending yourself against charges of allowing discriminatory behavior would just be too costly. why allow it?
kelnos 8y ago
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.
unstrafed 8y ago
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.
- aventrix 8y ago
  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.
Shelnutt2 8y ago
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.
mandeepj 8y ago
> I ended up selling it the next week for $7k Did you sell it to an individual?

csours 8y ago

Completely agree with user cstejerean here. You didn't say anything about your car, but I will hazard a guess that it was over 10 years old, but still a somewhat rare or desirable vehicle. Carmax doesn't want vehicles over 10 years old. Also, to other commentors here, consider tax implications when you compare sale price on a trade-in. If you wind up paying taxes on the sale of your vehicle, that may offset the increase in price on a private sale.

jjnoakes 8y ago
Don't buyers pay the sales tax?
- csours 8y ago
  It appears that I had an incorrect assumption: https://www.dmv.org/articles/income-tax-implications-of-selling-a-used-car/ https://www.dmv.org/articles/income-tax-implications-of-sell... Note that this is not an official DMV site for any government organization
- hellogoodbyeeee 8y ago
  When you buy a used car, you pay sales tax on the purchase price less the value of your trade in. So effectively, you need a private sale offer of at least the sales tax rate higher than the trade in offer to break even. Sales tax wouldn't come in to play if you just sold your car to Car Max though.

craftyguy 8y ago

That's a classic used car tactic, and it's amazing how folks still become fixated on the price they'll be able to buy something for without realizing the price difference will come from the amount they receive from their 'trade-in.'

duxup 8y ago
Trade in, also financing.
- craftyguy 8y ago
  Oh yea, definitely that too. Though it requires a bit more than subtracting two numbers to figure out you're being taken advantage of, so it's less obvious for folks who haven't done math in decades (more people than you think).

illumin8 8y ago

This is spot on. They offered me $6500 for my car, which was way below blue book. I sold it on Craigslist for $9700 a few days later.

cstejerean 8y ago
You will always be able to get more money on a private party sale than trading into a dealer. Did any other dealership offer you more than $6,500?
- illumin8 8y ago
  Yes, another dealership offered me $7500. CarMax was by far the low ball offer.
  - goatherders 8y ago
    The difference of 800 for a car in that price range is far from significant.
    - praneshp 8y ago
      What? It's 10%, and definitely non-trivial.
bdcravens 8y ago
Of course they won't give you private sale value; they're buying it to resell.

cstejerean 8y ago

If Carmax offered you 2k then the car you were trading in was not something they were interested in, so they probably offered you what they could get at auction for it. There are certain things for which you don’t want to use carmax. Also, did you sell it private party for $7k or was that at another dealership? I’ve bought and sold a decent number of cars over be years and carmax has routinely offered the best price I could get from any other dealership, but it depends on the specifics. I may trade in my heavily modified Jeep Wrangler next and that’s not something I would bother with carmax for. They don’t generally sell modified 4x4 rigs, so they’re likely to flip it at auction and therefore make a lowball offer. So I’m going to go to a dealership that specializes in what I’m selling.

goatherders 8y ago

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 took less than an hour.

ouid 8y ago
Your time is worth more than what, exactly? How many hours of work is worth an extra $1000?
- kbutler 8y ago
  ...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.
  - bittercynic 8y ago
    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.
    - kbutler 8y ago
      ...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.
  - ouid 8y ago
    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.

blhack 8y ago

Car dealers don't use Kelly blue book, they use either black book or "MMR" (Mannheim market report).

crb002 8y ago
You can go to Mannheim and see auction results from the previous weeks and see what your vehicle is going for. Print it out when you go in, they are saving the $500-$1000 cut Mannheim takes.

larsiusprime 8y ago

This is just anecdata. We bought a used car at Carmax and they gave us way, way, way above bluebook value for our trade-in (and all other offers, too -- and we were pretty aggressive in researching trade-in offers at other places and were prepared to be underballed by Carmax). My anecdata is no more useful than yours. Unless someone provides some actual reliable data points to produce a real, known trend, there's no proof here.

ydt 8y ago
My experience was similar. I sold a 2006 to them that had major visible rust issues. The KBB was 1650, they gave me 1600. I was surprised they bought it at all to be honest.
matt-attack 8y ago
Since we're telling anecdotes, I brought in a 1999 Honda Prelude back in 2005. They offered me $6k. I sold it on eBay for $11k.
argonaut 8y ago
A trade-in is not the same as an actual sale for cash. If you indeed got a great deal on the trade-in it just meant you got less of a great deal on the other components of the sale.
- fma 8y ago
  As far as I know, CarMax doesn't negotiate on the price. The price they list is the out the door price. So it's not like OP walked in and they added document fews and headlight fluid fees. He knew the price he was going to pay for the CarMax car, and was pleasantly surprised with the trade in value of his old car.

crb002 8y ago

Greed goes both ways. Tempted to haggle with them knowing their fat margins, especially near end of quarter when salespeople are focused on cashflow now not profit next quarter.

matt-attack 8y ago

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 lower our prices) should be viewed as anti-consumer. At least that's how I take it. I'd never, in a million years, buy something that high in price where the price couldn't be negotiated. Lastly, the article [1] that's linked to in OP's article is actually more fascinating in my opinion. It describes a California court ruling against CarMax's inspection policy and how it violates 2006 California Consumer Protection statutes. Pretty interesting. [1] https://jalopnik.com/california-court-says-carmax-certification-violates-con-1788101655 https://jalopnik.com/california-court-says-carmax-certificat...

mgkimsal 8y ago
> In reality the notion that they refuse to haggle (i.e. refuse to lower our prices) should be viewed as anti-consumer Lowering prices isn't the same as haggling. Haggling is going to see some salespeople lowering the price more or less for some people vs others, and open them up for a massive discrimination class action lawsuit.
- matt-attack 8y ago
  > salespeople lowering the price more or less for some people vs others Agreed. Why must that naturally lead to the idea of discrimination? If I'm selling a car privately, and a buyers arrives and agrees to pay my full asking price, have I discriminated against him, even though I know secretly I would have taking $1k less than asking, had he merely asked?
  - mgkimsal 8y ago
    if you're a larger company, defending yourself against charges of allowing discriminatory behavior would just be too costly. why allow it?

kelnos 8y ago

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.

unstrafed 8y ago

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.

aventrix 8y ago
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.

Shelnutt2 8y ago

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.

mandeepj 8y ago

> I ended up selling it the next week for $7k Did you sell it to an individual?