Have you ever been to an auto auction? Some may consider an auctioneer to be a ‘carny’. He talks at over 200 mph. Mumbling what appears to be nothing more than gibberish and random numbers.
But if you added all the sales up by those supposed hucksters, you would soon realize that only Wall Street and Walmart sell more goods over the course of a year. Over ten million cars are bought and sold at auctions by these professionals. Hundreds of thousands of dealers have access to the vehicles. With all that free market competition taking place, Carmax is just one of many dealers that must compete for all those cars.
Can Carmax offer a ‘good value’ compared to all that competition?
The fairest way to look at this is to compare apples to apples. Ebay is a godsend in this respect. Their online auction marketplace offers the products of thousands of dealers and with a ‘completed items’ section, it’s fairly easy to match and pair similar products that Carmax offers with ones from online dealers that have strong positive feedback.
So let’s compare…
|Ebay (96+% positive feedback)||Carmax|
|2008 Chrysler Town & Country Touring||2008 Chrysler Town & Country Touring|
|53k Miles : $17,480||53k miles : $21,599|
|VIN# 2A4RR5D13AR493039||VIN# 2A8HR54P98R737110|
|2010 Toyota Camry LE||2010 Toyota Camry LE|
|6k Miles: $18,500||10k Miles: $21,147|
|VIN# 4T4BF3EK8AR052894||VIN# 4T1BF3EK8AU058026|
|2008 Chevy Silverado Crew Cab 4×4 Z71||
2008 Chevy Silverado Crew Cab 4×4 Z71
|61k Miles: $21,780||69k Miles : $23,998|
|VIN# 2GCEK13C681142333||VIN# 3GCEK133X8G184284|
|2007 Nissan Murano SL||2007 Nissan Murano SL|
|46k Miles: $21,480||46k Miles: 24,998|
|VIN# JN8AZ08T57W506251||VIN# JN8AZ08W87W662259|
|2008 Cadillac Escalade EXT||2008 Cadillac Escalade EXT|
|26k Miles: $39,478||26k Miles : $41,998|
|VIN# 3GYFK62848G198870||VIN# 1GYFK63898R270953|
|2007 Toyota Tundra 2dr Reg Cab||2007 Toyota Tundra 2dr Reg Cab|
|45k Miles: $15,473||44k Miles: $18,147|
|VIN# 5TFJV52167X002345||VIN# 5TFJV52137X001766|
|2006 Chevrolet Cobalt LS||2006 Chevy Cobalt LS|
|55k Miles : $7,105||49k miles: $11,988|
|VIN# 1G1AL15F167823351||VIN# 1G1AK55F767865131|
|2003 Chevrolet S10 LS Ext Cab||2002 Chevrolet S10 LS Ext Cab|
|32k Miles: $8,805||59k Miles: $11,748|
|VIN# 1GCCS19X038102904||VIN# 1GCCS19W628142300|
|2003 Mercedes-Benz E320||2003 Mercedes-Benz E320|
|60k Miles: $15,480||70k Miles: $17,147|
|VIN# WDBUF70J03A132576||VIN# WDBUF65J93A194478|
|2007 Ford Explorer XLT||2002 Ford Explorer XLT|
|87k Miles: $9,500||90k Miles : $11,147|
|VIN# 1FMEU73E27UA84069||VIN# 1FMZU73E92ZC28780|
This wasn’t surprising. To be blunt about it, Carmax has to pay a lot of middlemen. They have a fully staffed corporate office, over ten thousand employees and $4 billion in long-term debt. Between the shareholders, executives, bondholders, employees, and contractors, there is a lot of margin that needs to be made on each one of their cars.
An online seller doesn’t have anywhere near this expense. Since virtually all dealer auto auctions cater to independent used car dealers, the barriers to buying the same cars as seen above is between small and non-existent.
Carmax can acquire some vehicles in ‘closed sales’ where the manufacturer will restrict purchases to new car dealers. However these opportunities are very few and far between and most Carmax dealerships have no new car franchise.. As shown by some of Ebays larger sellers, you can generally get the same type of vehicle without having to pay a healthy four-figured premium.
Does Carmax have some advantages? Absolutely. You typically don’t have to wait as long to buy your car. Like any brick and mortar dealership, you also have an extensive number of vehicles to check out and test drive beforehand. A lot of folks like to kick the tires first before buying anything. Carmax does offer that luxury along with the assurance of a 5 day money back guarantees and a 30 day ‘Limited’ warranty.
But there is also nothing stopping the same customer from test driving a vehicle at a local dealership and then buying it online for thousands less. This is where Carmax falls short. For those who already know what they want and are patient with the buying process, online dealers are the way to go. Many of the vehicles that are sold by Carmax already have manufacturer warranties that far eclipse the 30 day ‘Limited’ warranty. So the assurance of this restrictive warranty is usually minimal at best.
Unless you need it right now, the large scale online dealer will usually have the better deal.