Steven Lang And Doug DeMuro Debate Carmax

Steven Lang
by Steven Lang
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steven lang and doug demuro debate carmax

Earlier this week I wrote about how CarMax is heavily constrained by a market that has flip-flopped between six years worth of heavy car sales and about 18 months of resurgent truck and SUV demand. Long story short, CarMax’s acquisition costs for trucks, SUVs and crossovers has gone up considerably, and the supply of this inventory has cratered due to new car dealers keeping the bulk of this inventory for themselves.

Not everybody liked what I wrote. Case in point.

Within a couple hours of my posting the article on Facebook, I received a response from a good friend who has been linked to CarMax time and time again: Doug DeMuro.

Doug has been a champion of CarMax and their extended warranties in much the same way as I would champion staying the hell away from any extended warranty plan.

Doug loves his Range Rover that he bought from CarMax. I think it’s overpriced junk. He features Hummers and Ferraris. I finance Fords and Suzukis. Doug and I have historically been at polar-opposite ends when it comes to a variety of retail-related topics (extended warranty plans, what used cars to buy, the fact belief that luxury minivans are a dumb idea), and it didn’t long for the two of us to ram heads when it came to CarMax and their recent financials.

Doug DeMuro: There’s no news! CarMax reported $128M in earnings this quarter, down from last year’s $130M. That’s miniscule. And earnings per share was actually up, from 60c to 63c. All companies have bad quarters, and this wasn’t even that. I have absolutely no doubt CarMax will continue along full speed ahead.

Steven Lang: Care to debate me on that Doug?

Doug DeMuro: Right after we debate Amazon being in “big trouble” because they missed earnings in Q3 2014:…/amazon-earnings-95-cents-lost-per…

Since then the stock is up 115 percent and they just passed Wal-Mart as America’s largest retailer by market cap. Time will tell …

Steven Lang: We are on the same wavelength when it comes to Amazon. I even wrote about it on Jalopnik. Carmax is a different story based on market fundamentals. Care to have a friendly public debate?

Doug DeMuro: Unfortunately, neither of us are impartial. You are a competitor of CarMax’s, and have a financial interest in their failure.

Meanwhile, as for me, when I went to drive my Range Rover the other day, it was tilted to one side like the Titanic right before Leonardo DiCaprio froze to death. Also, the power folding mirrors no longer operate. So I have a financial interest in CarMax’s continued success and prosperity, at least until my warranty runs out on December 7, 2018, a date which will live in extended service contract infamy.

Here’s what I propose: instead of a debate, we get a dog and we line him up at a row of car dealerships, next to a CarMax and a name-brand dealer. Then we have the employees stand outside and scream and yell and hold up treats to try to attract the dog. Whoever the dog chooses wins.

NOTE: I also think this is how the World Cup should be decided, and the majority of Division III college football games.

Or we can just check the numbers in a year smile emoticon

EDIT: This may be obvious but I just wanted to note that the dog must be an IMPARTIAL breed, such as a labradoodle or a chihuahua, and not one of those biased great danes, which I am told heavily prefer a) name brand car dealerships and also b) slobbering all over your clothes.

Steven Lang: Funny, but untrue. I don’t sell late-model cars and actually have purchased hundreds of their trade-ins. I want them to succeed but that’s beside the point. I’m offering a third and final opportunity to debate the merits. It’s your call.

Doug DeMuro OK, OK, you don’t like the dog idea. A better plan: you walk into a CarMax. I walk into a name brand car dealer. We both examine their free giveaways to see which is better. Does CarMax free coffee trump Name Brand Dealership bag of Frito’s? Does CarMax free windbreaker trump Name Brand Dealership free glossy brochure of the 2013 RAM 1500, of which they still have nine in inventory??? WE FIND OUT!

IF YOU WANT ME TO BE SERIOUS, which I find very difficult to do, I will say this: it is never, ever, EVER, a good idea to judge a company based on one, or even four, bad quarters. I mean, hell, Volvo has been having bad quarters since like 2004, and they’re still kickin! And I was just in a new XC90, where the infotainment screen is so big it could swallow a child, sort of like in “The Ring” except the child wouldn’t try to kill you, it would merely provide directions in Swedish.

Here’s the reality: CarMax stock was trading around $18 per share in summer 2012, and by summer 2015 it was well above $70 per share. This is a 170 percent increase in three years, and it is unsustainable for ANY company. ANY company in ANY part of the world, selling ANY product. They are bound to slow down. So now they are slowing down, and I think it’s wrong to use one SLIGHTLY off-the-mark quarter say they’re in “serious trouble.” To be honest, I don’t find it a point worth debating. And I would make the same argument for CarMax, or Amazon, or Netflix, or Apple, or the company that makes the chair I’m sitting on. (“Cheap Shit From China Inc.)

So like I said, we will see the numbers in a year. If CarMax is still faltering, then we can debate it! With or without dogs.

Steven Lang: You’re parsing out the facts. CarMax is at the same price point as they were eight years ago and their issues go far beyond having one bad quarter. You insinuating that I base my findings on one bad quarter is almost as deceptive as you promoting extended warranties based on one bad car. If you can offer anything other than canned cliches and Dave Barry impersonations, feel free. Otherwise I’ll see this thread as yet another lightweight song and dance.


And so our little mini-debate kinda came and went. Doug does have a decent point about one quarter not making a bad company (although he underestimates my familiarity with confused labradoodles since I own one) and I’m right on the money on pretty much everything else.

So what about you? What do you think about CarMax? Is it a company worth investing on this unanticipated quarterly dip? Should you buy your next used car there? Or is Carmax constrained by other forces that go far beyond the scope of our debate? What says you?

Steven Lang
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  • Kzac Kzac on Jan 09, 2016

    The truth about Car Max is it will be around as long as Car Dealerships exist. It offers a viable and profitable business model which provides less frustration and aggression when compared to the more traditional vehicle dealerships. The Car Max model survived the financial failure of 2008, so its here to stay (at least for now). The problem with dealerships is they don't understand their potential customers, they chase off more potential customers than they actually ever service. I recently purchased a char at one of our local mom and pop furniture sales establishments. I had initially attempted to purchase that same chair at the big box store at the local mall, where the sales staff told me the chair I was looking for was not available nationally, as they attempted to sell me a 1000.00 chair. The mom and pop shop had the very chair in stock that I wanted, and they allowed us to sit in the chair to verify it met our needs and was what we wanted. We stayed at the mom and pop shop for about 2 hours and finally went home with a chair that met our needs completely and was slightly more expensive than the chair we came to purchase. The bottom line is the mom and pop shop made the sale and I will send anyone I know looking for furniture to their establishment. Why didn't the aggressive furniture dealer sell meet my needs the same way? I had like inventory, it had a larger and better dressed sales staff, it had the location (at the mall), it actually had longer business hours. So what was the difference? Sales models in the automotive industry are based on a paradigm which was initiated after WWII when supply verses demand was inverse to its current condition. With middle class America shrinking the sales models of yesteryear don't fit the needs of today. Expect and even anticipate them changing for the future. The Car Max marketing approach will not be the model that wins out in the end, however is a step in the right direction. Expect the financial institutions to push for more value in the assets they finance, expect the term EUL to come into play for all non-new vehicles sales.

  • Ruggles Ruggles on Jan 10, 2016

    RE: "Unfortunately, neither of us are impartial. You are a competitor of CarMax’s, and have a financial interest in their failure." No, Mr. Lang is NOT impartial. He prefers to have a quality competitor like CarMax in the marketplace establishing "price cover" rather than a bunch of price whores muddying up the market. I once ran the largest Dodge dealership in the Chicago region, which was right around the corner from the largest Chevrolet store in the world. We made a NICE living off their overflow. Competitors of the Ford Auto Collection never wanted that deal to fold up as it provided nice price cover to sell against. I sure don't think Mr. Lang wants CarMax to fail, but I don't want to put words in his mouth either, so I'll wait for his comments. After all, auto retail is about making gross profit in a competitive market, not just selling vehicle. I know that disappoints a lot of people who figure if a dealer is rich enough to get into business in the first place, he is rich enough to be in business for altruistic reasons instead of crass profit motivations. Everyone knows how easy auto retail is, right?

  • RHD This looks like a lead balloon. You could buy a fantastic classic car for a hundred grand, or a Mercedes depreciationmobile. There isn't much reason to consider this over many other excellent vehicles that cost less. It's probably fast, but nothing else about it is in the least bit outstanding, except for the balance owed on the financing.
  • Jeff A bread van worthy of praise by Tassos.
  • Jeff The car itself is in really good shape and it is worth the money. It has lots of life left in it and can easily go over 200k.
  • IBx1 Awww my first comment got deletedTake your “millennial anti theft device” trope and wake up to the fact that we’re the only ones keeping manuals around.
  • ToolGuy "Images © 2023 Tim Healey/TTAC; Mercedes-Benz"• I bet I can tell you which is which.