Car loan and CarMax
August 24, 2009 2:22 PM   Subscribe

Are there reasons I should avoid CarMax auto financing and go with my local bank?

We're intent on buying a used car this week at CarMax and my wife wants to use their in-store financing to keep the whole thing simple.

I know conventional wisdom posted all over the Internet holds that you should line up financing at your bank, on the other hand I think it's common knowledge that CarMax is not run like a shark tank. So my question is whether I need to be on guard getting a loan with them and what I might want to watch out for doing the deal. Our time is more important than merely saving a few bucks, which is why we're doing CarMax and trying to get it over with as smoothly as possible, so a few APR points or a few hundred dollars here or there is not a big deal.

I'm already doing a little due diligence by calling both places, but I'd like to know what to ask for or look for. My bank rep admitted to me that their rates aren't as good as dealers right now; she said they offer 8%, no downpayment, and require 2 years of tax returns (I'm self employed). The guy at Carmax would not answer any questions about downpayment, rates, or paperwork requirements until I submit to a credit check. So that's where I'm at now. Both places appear to allow early payment without penalty (this is even stated on the CarMax site) so maybe it's all good and I need to relax.
posted by crapmatic to Work & Money (13 answers total)
Actually I should clarify that a few APR points one way or the other does matter (for some reason I thought a point was 0.1%), but like I said this is mostly about getting the transaction done briskly and not worrying over the small stuff.
posted by crapmatic at 2:28 PM on August 24, 2009

The last person I knew who used CarMax's in-store financing was saddled with a 13% loan. I would line up financing with your bank (or, better, a credit union) and then go to CarMax. If the convenience and ease of CarMax's financing satisfies you, go for it. If not, don't use it... but the worst position to be in is where you feel like you've committed to buying the car and you get shafted by the financing office. The fact that the CarMax guy refuses to answer basic questions should be a red flag.
posted by deanc at 2:35 PM on August 24, 2009 [1 favorite]

Seconding a credit union if you are a member in one. Otherwise, your bank.
Just because CarMax doesn't prey upon you on the showroom, doesn't mean they don't draw blood in the financing. That's where they make the real money, afterall.
posted by Thorzdad at 2:54 PM on August 24, 2009

I have a loan through CarMax, it's considerably less than 13%, and my credit is shit. It was easy and I've had no problems with them. I set up automatic payments on their website when I bought the car and I've never thought much about them again until this question.
posted by desjardins at 2:56 PM on August 24, 2009

I should mention that I bought the car in 2007, before the economy went down the toilet.
posted by desjardins at 2:57 PM on August 24, 2009

I had a crap rate with them, but then, I had crap credit. As long as you have a point of comparison (8%, looks like) there's no reason not to let CarMax run your credit and find out what they can offer. I had no complaints with their website or payments or customer service or anything - then again, I was an easy customer, so YMMV :)
posted by restless_nomad at 3:00 PM on August 24, 2009

I don't have a car loan through CarMax, but I have one through another dealership. Overall, the financing process through the dealership was very unpleasant. I got an OK rate and terms considering my lack of credit, but since I could only go in on Sunday, their busiest day, I had to wait for several hours to see a finance officer, then wait more for them to run my credit, and so on and so on. It was very late by the time we got to the point of signing papers, and that definitely affected some of my decision-making (such as agreeing to a "gap insurance" that is really a waste of money since I put money down and payed my car off quicker than it depreciated).

In other words, don't assume that it will be faster to go with on-site financing. Next time, I will take the 30-60 minutes on my lunch break to deal with a loan officer at my bank, rather than 4 hours to go through the financing process.
posted by muddgirl at 3:09 PM on August 24, 2009

When I lived in Wisconsin a decade ago, the local Carmax was shut down by the AG for breaking laws against usury--charging absurdly high interest, like 20% on car loans to people who wouldn't normally qualify. When you wrote "I think it's common knowledge that CarMax is not run like a shark tank," I did a double take, because a shark tank is exactly what CarMax is reputed to be where financing is concerned.

[OTOH, CarMax service treated me very well when I had a dispute on a fraudulent warranty replacement with a Mazda dealer.]
posted by fatbird at 3:22 PM on August 24, 2009 [1 favorite]

Ditto desjardins. I bought my car from CarMax in 2007, financed through CarMax, and everything was a breeze. Quick too. I can't recall my exact interest rate, but I think it was less than (or at least similar to) 8%.
posted by dino might at 3:26 PM on August 24, 2009

You should do some research on what loans are available to you. Check your bank, a couple of credit unions, etc. Get as much information as you can ahead of time. Used car loans are often based on the age of the car - if the loaner doesn't imagine the car has resell value, that will be factored in. Loan officers should be able to tell you the ages that affect rates. I had a terrible experience with CarMax, but if they have the best deal, you should take it.

CarMax has some sort of time-frame with an offer, but in my case it began at the start of business day, let's say Monday, on the day I made an offer (which I made at 8 p.m.) and ended before 5 pm. on Wednesday so how they call that 3 days, I don't know.

I had a terrible experience with CarMax - don't recall the loan they offered but it was fully twice what I was offered by my bank and my credit union. (In then end, I paid cash, instead of half cash, which may not be an option for you.) During the week or so I was telling my CarMax story, no one countered it and I heard many similar stories.

They also stripped everything out of the car that wasn't tied down - floor mats, cargo net, and some under seat storage bins that were clearly identified as part of the sale during the test drive. (The idiot I was family-guilted into buying the car for failed to notice this when picking up the car.) So, yeah, your remark about not a shark tank surprised me, too.
posted by Lesser Shrew at 5:09 PM on August 24, 2009

A few weeks ago I could get 6.5% through my credit union. I think you can do better than the 8% and when I've purchased a car in the past using financing from a credit union it was not a problem at all - no additional hassle.
posted by fieldtrip at 6:54 PM on August 24, 2009

Yeah, a loan is a loan, as long as the loaner is reasonably honest and solvent. Get quoted on both rates, and use the better one.
posted by Citrus at 7:03 AM on August 25, 2009

Ditto on great experience with Car Max. Only problem I had was their inability to tell the truth about the REAL condition of the car. Two bent rear rims later...

Have your car looked at by a knowledgable mechanic (if possible) first!

BTW, the above mentioned rims were replaced by CarMax at no cost since I came in within a month with my complaint. I'm sure they would've done it if I came in a little later too...but, I was lucky.
posted by littleredwagon at 8:15 AM on August 26, 2009

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