Pre-owned Prize Fight: AutoNation Wants to Out-CarMax CarMax

The used car market? Saturated. The battle? About to begin.

America’s largest new-car retailer knows there’s money in them there pre-owned vehicles and has hatched a half-billion-dollar plan to take on the country’s largest used-car retailer.

According to Automotive News, AutoNation Inc. will greatly expand its retailing footprint by building standalone used-vehicle stores.

The first five stores, one targeting Houston, should be open by the end of 2017. Another 20 are reportedly in the works. By the time the expansion strategy is complete, up to 100 standalone used vehicle stores carrying the AutoNation banner could tap into the massive glut of pre-owned vehicles flooding the country’s car lots.

That’s the physical presence of the retailer’s new plan. At the customer level, no-haggle pricing will extend to all used vehicles sold at AutoNation USA stores and through its franchised dealer network. In addition to the creation of new service centers for each new dealership, renovations are coming for the existing service network. Four new auto auctions will open within the next two years, along with 18 new collision centers.

It’s a big roll-out for a big market.

“It’s a 40 million (units) a year marketplace,” AutoNation CEO Mike Jackson told Automotive News. “The consumer is still dying for a better experience in pre-owned.”

The retailer’s used-vehicle gambit goes beyond cars. As part of the expansion, a line of AutoNation-branded accessories and replacement parts will be made available through the dealerships. The first component — a battery — is already on sale.

Overall, the plan is to beat CarMax at its own game. AutoNation wants to draw owners with out-of-warranty vehicles to its repair shops for scheduled maintenance, while CarMax customers only see their vehicle in the shop if they’ve purchased the MaxCare plan. That service plan allows customers to use independent repair shops, but it comes at a cost — CarMax charges a higher deductible for that work.

Under the new plan, all stores will switch to the AutoNation Express in-store platform, where transactions are expected to take place within an hour. Buyers walk away with two years of free routine maintenance.

For its part, CarMax is fighting back by making the buying experience easier. According to the Charlotte Business Journal, the retailer recently launched a pilot project in Charlotte, North Carolina, that allows customers to select, finance and purchase a vehicle without leaving their home. Test drive vehicles will roll up to would-be buyers’ front doors.

If successful, the retailer could implement the program in other markets.