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…]