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Honest question: why? Cars’ rapid depreciation makes a gently used car a much better buy than a new one in just about all circumstances. And CarMax does thoroug

Honest question: why? Cars’ rapid depreciation makes a gently used car a much better buy than a new one in just about all circumstances. And CarMax does thorough inspections and provides solid warranties for cars they sell, so you don’t have to worry about “used” equaling “unreliable.”

pps43 8y ago
Asymmetric information. The buyer has no way of knowing whether the car was used gently, which results in market for lemons. CarMax has no incentive to fail a car at inspection. They'd rather sell it to you and if it breaks, fix it under warranty. But for you a broken car might mean ruined vacation or road trip.
- max76 8y ago
  CarMax has incentive to fail cars at inspection before they purchase the car, or to use the inspection results to adjust the price they pay for the car. The price of fixing a car under warranty can be higher than the difference between their purchase price and their sell price.
  - pps43 8y ago
    You also need to multiply the price of fixing a car under warranty by probability of the car breaking before that warranty expires. CarMax only makes money on the cars it sells, so as long as there is a decent chance the car will break after warranty expires, it still might make economical sense to do it.
- smacktoward 8y ago
  CarMax gives you a free history report on the life of the vehicle to date, including how many owners it's had, any accidents it's been involved in, any recalls it's been included in, registered odometer readings over the life of the car, and so forth. (Details here: https://www.carmax.com/articles/free-vehicle-history-report-walk-through https://www.carmax.com/articles/free-vehicle-history-report-...) If you don't trust CarMax to give you an accurate report, you can buy a separate one from a third party like Carfax (https://www.carfax.com/vehicle-history-reports/ https://www.carfax.com/vehicle-history-reports/) to confirm the details. > CarMax has no incentive to fail a car at inspection. They'd rather sell it to you and if it breaks, fix it under warranty. Any car you buy from CarMax can optionally be covered by their "MaxCare" extended warranty, which lets you choose a deductible and then obligates CarMax to pay the remaining cost of any repairs to the vehicle beyond that deductible. So if you set the deductible at, say, $250, and then you get the vehicle home and discover that the transmission is shot, the worst case scenario is you're out $250. CarMax eats the rest of the cost. Car YouTuber Doug DeMuro bought a Range Rover from CarMax with this type of coverage a few years back. He paid $3,899 for the extended warranty, and CarMax ended up paying out $16,925 on warranty repairs over the six years he owned the car. More details here: https://www.youtube.com/watch?v=E3jA55TJboA https://www.youtube.com/watch?v=E3jA55TJboA
  - pps43 8y ago
    If the previous owner only changed oil once (just before trading the car in), how would CarMax or Carfax know?
    - smacktoward 8y ago
      They would know it had missed a bunch of scheduled maintenance. They know how many miles are on the car, they know how many times it should have had its oil changed over that many miles. If the owner never brought it in for service, you can say maybe they were just a gear-head and were changing the oil themselves in their garage. But there's lots of service tasks you can't do in your garage, so if the car missed lots of scheduled maintenance windows, that puts up a big red flag.
      - kbutler 8y ago
        Oil changes often don't get recorded.
      - pps43 8y ago
        Typical lease is three years. In that timeframe there isn't a bunch of scheduled maintenance. You need to pass state inspection a couple of times, but apart from that there's normally nothing really to service yet. From the carfax report the owner who did the oil changes on schedule with quality synthetic oil looks indistinguishable from the one who did nothing and drove the car like a rental. An you can't tell what's inside the engine block until you open it up.
  - amyjess 8y ago
    Would one of those reports tell me if a car has ever been smoked in? I quit five years ago, and ever since then I've been extremely sensitive to cigarette smoke to the point where sitting in a car that people have smoked in before makes me sick.
deleted 8y ago
[deleted]
pfranz 8y ago
Is that still true? I feel like that used to be true, but not anymore. Since the 2008 recession (and the "cash for clunkers" program) every time I've tried to crunch the numbers, a 1-2 year old car is only 5-10% cheaper than a new one instead of 25%-50% cheaper. Maybe it's the specific cars I was interested in? I figured the economics of used cars had just changed.
- lotsofpulp 8y ago
  Data is much more comprehensive now, and everyone knows which brands/models to buy.
  - pfranz 8y ago
    I would have figured the opposite. That data has made most all car-makers build cars that fit the same customer's needs; lower TCO, less maintenance, lasts much longer. Japanese cars being reliable has been a known thing since the 70s. I feel like today it's fairly well known that most any car is reasonably safe, will last awhile, and have reasonable repair costs (excluding luxury cars).
    - lotsofpulp 8y ago
      I’m under the impression that American brands are still terrible, and Japanese brands are still the go to for long term reliability and ease of maintenance. https://jalopnik.com/every-single-american-car-brand-is-on-the-bottom-half-o-1829974713 https://jalopnik.com/every-single-american-car-brand-is-on-t... I’m sure this is priced into buying used Japanese cars.
      - pfranz 8y ago
        Thanks for that info. I don't follow the car press so it's good to see some actual info. I do think a brand like Honda has the used car pricing built-in. Parts are definitely cheap and plentiful, but they still seem to put some parts in hard-to reach places (all companies seem to do this). But I don't think a head-to-head tells you if the lowest-ranking brand now is better or worse than the lowest-ranking brand from 20 years ago. I'm not saying all the brands are the same, but the reliability of the average (or any) car today seems significantly better than 20 or 30 years ago. I imagine the spread from best to worse is a lot more narrow.

pps43 8y ago

Asymmetric information. The buyer has no way of knowing whether the car was used gently, which results in market for lemons. CarMax has no incentive to fail a car at inspection. They'd rather sell it to you and if it breaks, fix it under warranty. But for you a broken car might mean ruined vacation or road trip.

max76 8y ago
CarMax has incentive to fail cars at inspection before they purchase the car, or to use the inspection results to adjust the price they pay for the car. The price of fixing a car under warranty can be higher than the difference between their purchase price and their sell price.
- pps43 8y ago
  You also need to multiply the price of fixing a car under warranty by probability of the car breaking before that warranty expires. CarMax only makes money on the cars it sells, so as long as there is a decent chance the car will break after warranty expires, it still might make economical sense to do it.
smacktoward 8y ago
CarMax gives you a free history report on the life of the vehicle to date, including how many owners it's had, any accidents it's been involved in, any recalls it's been included in, registered odometer readings over the life of the car, and so forth. (Details here: https://www.carmax.com/articles/free-vehicle-history-report-walk-through https://www.carmax.com/articles/free-vehicle-history-report-...) If you don't trust CarMax to give you an accurate report, you can buy a separate one from a third party like Carfax (https://www.carfax.com/vehicle-history-reports/ https://www.carfax.com/vehicle-history-reports/) to confirm the details. > CarMax has no incentive to fail a car at inspection. They'd rather sell it to you and if it breaks, fix it under warranty. Any car you buy from CarMax can optionally be covered by their "MaxCare" extended warranty, which lets you choose a deductible and then obligates CarMax to pay the remaining cost of any repairs to the vehicle beyond that deductible. So if you set the deductible at, say, $250, and then you get the vehicle home and discover that the transmission is shot, the worst case scenario is you're out $250. CarMax eats the rest of the cost. Car YouTuber Doug DeMuro bought a Range Rover from CarMax with this type of coverage a few years back. He paid $3,899 for the extended warranty, and CarMax ended up paying out $16,925 on warranty repairs over the six years he owned the car. More details here: https://www.youtube.com/watch?v=E3jA55TJboA https://www.youtube.com/watch?v=E3jA55TJboA
- pps43 8y ago
  If the previous owner only changed oil once (just before trading the car in), how would CarMax or Carfax know?
  - smacktoward 8y ago
    They would know it had missed a bunch of scheduled maintenance. They know how many miles are on the car, they know how many times it should have had its oil changed over that many miles. If the owner never brought it in for service, you can say maybe they were just a gear-head and were changing the oil themselves in their garage. But there's lots of service tasks you can't do in your garage, so if the car missed lots of scheduled maintenance windows, that puts up a big red flag.
    - kbutler 8y ago
      Oil changes often don't get recorded.
    - pps43 8y ago
      Typical lease is three years. In that timeframe there isn't a bunch of scheduled maintenance. You need to pass state inspection a couple of times, but apart from that there's normally nothing really to service yet. From the carfax report the owner who did the oil changes on schedule with quality synthetic oil looks indistinguishable from the one who did nothing and drove the car like a rental. An you can't tell what's inside the engine block until you open it up.
- amyjess 8y ago
  Would one of those reports tell me if a car has ever been smoked in? I quit five years ago, and ever since then I've been extremely sensitive to cigarette smoke to the point where sitting in a car that people have smoked in before makes me sick.

deleted 8y ago

[deleted]

pfranz 8y ago

Is that still true? I feel like that used to be true, but not anymore. Since the 2008 recession (and the "cash for clunkers" program) every time I've tried to crunch the numbers, a 1-2 year old car is only 5-10% cheaper than a new one instead of 25%-50% cheaper. Maybe it's the specific cars I was interested in? I figured the economics of used cars had just changed.

lotsofpulp 8y ago
Data is much more comprehensive now, and everyone knows which brands/models to buy.
- pfranz 8y ago
  I would have figured the opposite. That data has made most all car-makers build cars that fit the same customer's needs; lower TCO, less maintenance, lasts much longer. Japanese cars being reliable has been a known thing since the 70s. I feel like today it's fairly well known that most any car is reasonably safe, will last awhile, and have reasonable repair costs (excluding luxury cars).
  - lotsofpulp 8y ago
    I’m under the impression that American brands are still terrible, and Japanese brands are still the go to for long term reliability and ease of maintenance. https://jalopnik.com/every-single-american-car-brand-is-on-the-bottom-half-o-1829974713 https://jalopnik.com/every-single-american-car-brand-is-on-t... I’m sure this is priced into buying used Japanese cars.
    - pfranz 8y ago
      Thanks for that info. I don't follow the car press so it's good to see some actual info. I do think a brand like Honda has the used car pricing built-in. Parts are definitely cheap and plentiful, but they still seem to put some parts in hard-to reach places (all companies seem to do this). But I don't think a head-to-head tells you if the lowest-ranking brand now is better or worse than the lowest-ranking brand from 20 years ago. I'm not saying all the brands are the same, but the reliability of the average (or any) car today seems significantly better than 20 or 30 years ago. I imagine the spread from best to worse is a lot more narrow.