Carmax:The Way Car Buying Shouldn’t Be?

Written on:January 2, 2007
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Unhappy Carmax Owner

Interesting Carmax Photo

Carmax locations are popping up around the country, with about 74 locations in 35 markets Carmax is quickly becoming one of the biggest players in the US used car market.

As a car dealer myself I’m in total shock that they are reporting higher and higher profits every quarter. I’d say their are two main aspects of their business: buying and selling.

When we look at their purchasing of cars its one of the biggest rip offs in the business.  If you are trying to sell your car to them, the way they have you believe the process works is, you look up your cars Kelley Blue Book pricing and go into Carmax and walk out with a very similar amount. What happens nine times out of ten is you walk out with thousands less or get such a low ball offer you leave in astonishment.

Unfortunately there are lots of people in such desperate situations who have no other option then to take their offer. The way Carmax buys cars is as follows: they buy it from you so cheaply that they can mark it up a huge amount and sell the car themselves, or even take it to a wholesale “dealer only” auction and still make a profit on it. Either way, don’t expect Carmax to give you what you’re asking, or even something reasonably fair. This has nothing to do with the difference between private party and trade in pricing, this has to do with the difference of Carmax pricing and trade-in pricing.

The other aspect of their business is, of course, selling cars. Their business model here leaves me amazed beyond belief. They have the whole gimmick of “no hassle, no haggle pricing”.. it’s pure business genius. They are preying on people who hate dealing with car salesmen.  So, yes, no haggling, but what happens here is you get way over charged for a car worth hundreds, or in most cases, thousands less. Go to their site and do a simple search for a car and you’ll be amazed the prices they charge. For example, at the moment at our car dealer we have a 98 Civic…I found an almost identical car at Carmax. Carmax is asking $8995 for a 1998 model with over 100k miles !!! I’m selling the same car for $5995 and I’ll even throw in a year warranty.

Do a little car shopping people, Carmax is the biggest rip off in the used car market. I’m really not trying to make other dealers sound better, but my goal is to show the absurd prices and the effect of doing a little more homework before you buy your next car.

[Editor's Note: This is a guest posting...]

5 Comments add one

  1. John Doe says:

    This is a complete joke. The cars Carmax offers are much better cars then anyone else, that is why they cost more. Do you guys put it through a 125 point inspection? No. Do you offer a FREE 5 day money back guarantee? No. Does your warranty cover even HALF of what Carmax warranty covers? No. Whats funny is that I know of a Carmax that gets over 300 DEALERSHIPS, which probably includes YOURS, buying cars from them. You know why? Because they are the BEST, largest, used car RETAILER, in the industry. That’s great you have a 98 civic for cheaper, but I know you’re lying. See, Carmax does not sell cars over 10 years old. This was written in 2010, so the oldest car would have been a 2001. Nice try buddy. As far as them low balling people, what a complete joke. I took my car to 4 dealerships before taking it to Carmax, and Carmax offered me $30,000 for my BMW, where as the next highest offer was $24,000. I have done this over 8 times, and will never go anywhere else.

    Before you start bashing on a company that outsells your tiny dealer, get your facts straight. Don’t get mad because customers are tired of business practices of typical dealerships such as yourself. If you want to get ripped off, go to a normal dealership, take their shot gun financing, take a car with frame damage and they hide it. Do it.

  2. Yeah Right says:

    John Doe: You wouldn’t happen to be from the PR department of CarMax, now would you?

  3. Charlie Phelps says:

    Yeah Right: Close. “John Doe” posted his comment from 63.101.151.102. That IP address is owned by ACS. ACS happens to be the company that hosts CarMax.com. “John Doe” is likely one of the people that takes care of the CarMax web site.

    I suppose that implies a little bias :)

    John: Aside from your obvious bias, please note that this is a guest posting. We don’t own a dealership. Also, the post is from 2007. We did update the site software which screwed up the post dates (fixed the post date on this one). Feel free to check archive.org for confirmation.

    Also, since it’s clear you are an ACS employee (your ip address: 63.101.151.102, carmax.com ip address: 63.101.151.74) I question your claims about personally buying and selling cars at CarMax. It seems more likely that you take care of CarMax.com, and apparently get your ego bruised anytime you see anything other than glowing reviews for your website. Also, is ACS cool with you surfing blogs on company time?

  4. Franklin says:

    LOL!!!!!!!!!! I just walked out of carmax yesterday after 5 minutes. I bought in to the whole no haggle, 125 point inspection. I saw a 2010 Ram 1500 Crew Cab, with 20k miles, and their no hassle price was $31,400, something like that. Blue book values this truck at $21,000, and BRAND new trucks start at $21,475! Carmax IS a ripoff. I bet the poor sap that sold the truck was told, “Well, you know 21K may be the blue book value, but the most we can give you is $13500.”

  5. Truth says:

    Carmax loves to market itself as not a traditional dealer, well NOTHING could be further from the truth. Here is the deal when you visit a Carmax. If you get a vehicle appraised there is a nice little feature called ACR (Appraisal Cost Recovery)that they will not tell you about.

    What happens is the person who does your appraisal decides what they will offer you, they put that number in the system and when they hit the magic print button the computer will take off somewhere between $250-$3000, depending on the type of vehicle and the amount of money the person doing your appraisal thought the vehicle was worth. Example, if they offer you $500 on paper the person who did the appraisal most likely put either $1000-$1500 on your vehicle. If you get an appraisal that is above $8000 you can best believe you lost either $2,000 or $3,000 at a minimum from what the appraiser actually thought your vehicle was worth.

    Now, on to finance and sales side…after all expenses carmax makes on average somewhere around $2,200 on each vehicle, AFTER EXPENSES. What does that mean to you, the average mark up on each vehicle is about $4,000. If they offer you $10,000 on paper for your vehicle, chances are they are going to put that vehicle on the front lot for $14,000. Now keep in mind if they bought your trade from you in this scenario, they are making $2,000 on the trade and $4,000 on the sale….so right now they have got you for $6,000 and we haven’t even talked about financing yet. If you finance with them the sales consultant will run your credit and when the results from the lenders come back they will show you all the results from the various lenders with their specific interest rate. The sales consultant will tell you that this is the rate the lender wants to charge you…well that is not entirely true. Carmax bumps up the rate on almost all, if not every single one. What I mean is that depending on your state, the lender may think your credit is worth a rate of 6% but the magic computer will bump that rate up to 7-10% and guess what makes money on this, CARMAX.

    They were sued some time ago from what I understand for this practice and what they had to do is post a sign where you sign for your vehicle explaining that carmax “might” receive financial compensation for financing. Look around at the place you sign for your vehicle and you will see this sign, again depending on your state. At one point carmax did have higher standards than most of your dealers but this is really not so much the case anymore. Before the recession the wouldn’t sell a care with multiple painted panels and were pretty selective. Now, they will sell you a totally repainted vehicle with no problems. Now you tell me, why would a car be completely repainted? Most of the time that is because of an accident. They have relaxed their standards from much since 2007. The sad part is that they market themselves as different when in reality their practices are at least as bad as a traditional dealer.

    The only advantages of carmax are:

    • No haggle price(remember they are making about $4,000 on each one they sale)
    • Will buy your car from you(remember the magic computer is taking off a significant amount of money before you see their offer) and the five day return policy.
    • Now the five day return policy is for the most part 100% true. If you bring it back before the end of the 5th day, they will take it back. However, they do not have to give you back your trade if they don’t want to if you sold them your trade.

    Just be very careful when shopping with them. They will NOT negotiate prices at all which does make it easy, but you are paying a SERIOUS premium for not haggling. What I have just explained to you is the ABSOLUTE TRUTH and they can’t deny it at all. Buyer BEWARE!

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