By on July 22, 2021

With used-car prices soaring, retailer CarMax has been busy swooping up used vehicles to flip for sale.

That could be a solid strategy since the chip shortage has left new-car dealers bereft of vehicles on the lot.

CarMax said it has bought 236 percent more cars this year than last, leaving it with 40,000 vehicles in inventory — and that’s still 10,000 down from last year, according to Bloomberg.

“They are often pleasantly surprised with a higher offer than they anticipated,” Jim Lyski, executive vice president of corporate strategy, marketing and product for CarMax, said to Bloomberg about the company’s customers. “We would expect pricing to stay elevated in the near term.”

Dealers are desperate for product — new or used — to sell. So desperate, according to Bloomberg, that even so-called “clunkers” are fetching more money. Bloomberg cites Edmunds in reporting that cars with between 100,000 and 109,999 miles are going for an average of $16,489, up 31 percent from last year. Pickup trucks with high odometer readings are more valuable than other high-mileage cars, with Silverados and F-150s selling for over 40 percent more than last year.

As you might know, dealers use auctions to source used cars, in addition to taking vehicles in on trade. But even the auctions aren’t providing sanctuary, as their inventory is about one-third what it was two years ago.

For CarMax, the strategy of buying up used cars makes obvious sense — while the competition has barren lots, the retailer will be able to entice consumers to its showrooms, thanks to inventory, and still charge a premium since supply is tight.

When the market madness stops, no one knows. One economist quoted by Bloomberg said the spring’s stimulus checks, combined with tax-refund season, drove demand, and that demand might cool off. On the other hand, the chip shortage continues unabated.

That, plus cheap financing and the ability to get good money for trade-ins, both of which allow consumers to pay the high prices being asked, means that the sky-high pricing for cars, new and used, could be with us for a while. One forecaster suggests the high prices will remain for the rest of the year.

Forecasts are just that — and they can turn out wrong. That said, while the future is uncertain, in the present, you might still be considered insane if you want to buy a used car.

[Image: Gunter Nezhoda/Shutterstock.com]

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27 Comments on “CarMax On Used-Car Buying Spree As Market Madness Continues...”


  • avatar
    schmitt trigger

    A question for those who know the financial markets much better than me:

    Apparently this hot demand for used vehicles is spawning a “subprime” lending market similar to what happened with real state, a couple of decades back.

    Of course, we all know what happened when the bubble burst.
    Is there an opportunity for a similar debacle?

    • 0 avatar
      SoCalMikester

      nah. cars are relatively easy to repo

      • 0 avatar
        FreedMike

        Yeah, but the question is whether the lender has a better chance of recouping their default loss on a car or house.

      • 0 avatar
        Luke42

        @SoCalMikester,
        “nah. cars are relatively easy to repo”

        Sure, but if they’re all repo’d at the same time, that will create a glut in the market. That would be a market-problem (lower prices) and a problem for banks (bigger losses when they sell the car), even though everything is straightforward at the individual level.

        A glut of used cars probably wouldn’t be a big problem during the next few months, though, until the chip shortage gets sorted out.

        But this is all speculation based on market-principles. I’m under the impression that the crazyness in the used car market is mostly due to the shortage of new cars, and that a lot of people who would normally buy a new car can’t find one — and so buy used instead, which drives up used-car prices.

    • 0 avatar
      Scoutdude

      Subprime has been a part of the automotive lending market for decades. What I’ve read is that the avg credit score for people getting auto loans has risen in recent times as has the down payment% while the percentage of sub prime loans has gone down.

      Either way those lenders have been around for ages and do price their loans based on risk so that while they repo more cars the higher interest rates they charge more than make up for the losses on the reposed cars.

  • avatar
    SCE to AUX

    I assume CarMax is a savvy business, and so they won’t want to be holding inventory that they paid too much for. That means they either have high inventory turnover or else they expect the craziness to continue for a long time – or both.

    I’d say keep an eye on CarMax as a good indicator of price trends.

  • avatar
    SoCalMikester

    ive got a 2006 scion with under 60k bulletproof powertrain- 1.5liter and 5spd. always garaged, no mods aside from updated scion touchscreen stereo. its always going to be worth more to me than anyone else.

    kinda sad because it would make an excellent long distance commuter for another 200k miles

    • 0 avatar
      Nick_515

      SoCal, I got a PT Cruiser for local errands, and my brother in law got smitten with it (2.4liter stick shift, massive cargo space). But… it’s a PT Cruiser. So he asked me to find him something “like it, but you know… not it.”

      I settled on the xB. He does 800 mile jaunts four five times a year, so I didn’t want first gen due to the smallish engine and lack of sound deadening. Located a two-owner second gen with the bigger motor and stick shift. I read about the potential oil burning, so bit of a calculated risk. Has 130k; somebody had already scared the owner about possible oil consumption, so he only asked for (and received) four grand. Waiting to hear on how my BIL likes it. We’ll call his car the Japanese Pete :)

  • avatar
    JMII

    I keep tabs on the Corvette market (I own a C7) and the crazy pricing appears to be over as used prices are flattening out. Prices are still high but they are no longer climbing.

  • avatar
    Lou_BC

    AI programmed to provide maximum profits to Penske and Cox. Kinda like going to the casino and playing the slots. It might spit out the occasional jackpot but the player is just going to loose money.

  • avatar
    ttacgreg

    I just sold my 2020 RAV 4 Hybrid, 23,000 miles and a year and a half later, back to the same dealer for $500 less than I paid them for it. I certainly could have done better selling it myself but this was just quick and easy, cut and ried, and a satisfactory price, so .16 same RAV4 across the nation averaged $31,400. Woth zero options the MSRP was $28,800 before delivery & handling.

  • avatar
    thegamper

    I just bought my soon to be 16 year old son a 2008 Lexus RX 350 AWD with 140k miles on the clock. One previous owner, no reported accidents. Purchased for $8,000, sort of feel like I paid a bit more than I should have but listed close to $9K before negotiations. It has a few minor bumps and bruises, but the interior has aged very well, everything works, runs great, sounds great. Looking at prices nationally on same vehicle on autotrader, I would say I did fairly well considering how other RX’s are priced. The same/similar year vehicle are listed with close to or over 200K miles for the same money fairly regularly.

    I had been looking around for a few months, mostly CR-V’s, RAV4’s, Accords, Fusions, Equinox, Escapes. It has been decades since I was in the used car market and expected a lot more for my money to be honest. Shopping in the sub $10,000 market, desirable cars in that price range tend to be over 120K miles, have at least moderate cosmetic defects, undiagnosed mechanical defects including strange noises, suspension problems, etc. I don’t think a single car I looked at which priced below $10k was in “Great” cosmetic shape and completely free of any mechanical defect. Some of my observations generally is that there was a lot of value in used Buicks, Cadillacs, Lincolns (specifically sedans). Luxury cars with high miles are generally priced very similar to mass market volume cars of the same vintage and mileage. I generally tried to avoid turbocharged vehicles, European brands, Chryslers. I stumbled on this Lexus and figured it was a much better buy than a beat up CR-V for the same money.

    So even though I was a bit disappointed by what you get for the money, I do really dig the RX and my kid is over the moon happy with it. If no major breakdown, will be money well spent I hope.

    • 0 avatar
      GiddyHitch

      Make sure you change the transmission fluid if it hasn’t been done before. Toyota lifetime transmission fluid is BS I’ve come to find on our RX350. I started to get some occasional odd shifts and slippage after 180k but a fluid change cured most of it and it’s over 190k now. I’m going to do 60k changes on our Toyotas going forward.

  • avatar
    thegamper

    Oh, almost forgot. My kid was big on Subaru Foresters initially. We drove a few in our price range below 10K. It is robbery what they are charging for those on the used market. In my opinion the worst value and largest disconnect from reality that we encountered in our used car search. Seemed like they were charging top dollar despite serious mechanical and cosmetic defects, simply because they can I suspect….people must be buying them.

    • 0 avatar
      quaquaqua

      Why older Subarus hold their value despite the head gasket problems is bonkers to me. My friend’s ’09 Outback needed the engine overhaul at 55k miles.

  • avatar
    dmulyadi

    Guess time to sell my extra cars. Anyone interested in Suzuki SX4 crossover hatcback AWD? It’s Automatic. Or first gen RAV4 2 doors with turbo engine from Celiac GT4? Yes it’s manual and AWD too. I’ll keep the other two cars just in case.

  • avatar
    3SpeedAutomatic

    A story on YouTube via the WSJ states the rental car agencies were so desperate for inventory, they were turning to car auctions for fleet additions.
    Another contributing factor to the sky high prices for used cars.

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