Carmax Catch?

November 30, 2006 3:40 PM

I went to Carmax and consistenly saw cars priced under their Blue Book value. What is the catch?
posted by EasyLover to Shopping (14 answers total)

Contrary to popular opinion, the Blue Book value is actually the average dealer ASKING price of cars -- not the average SELLING price. At least that's what I heard recently (can't remember exactly where, but it had pretty high cred).

If that's true (and I think it is) it explains why so many dealers are able to sell below blue book price.
posted by wordwhiz at 3:59 PM on November 30, 2006

There isn't one (at least there wasn't for me). I bought a car from them a little over two years ago. I even had them transer a specific car from the other side of the country (for a moderate fee). Not to sound like a commercial, but my experiences buying and having my car maintained have all been really good. They've been the most honest and straight dealership I've ever dealt with. The service department has even done small things for free that VW quoted me $120 for (they replaced a headlight bulb which has to be done from underneath)... it could just be my location though. Good luck.
posted by someguynamedcarl at 4:05 PM on November 30, 2006 [1 favorite]

They have an interesting business model. They buy cars for under market value too. I have a 2004 Honda Civic that is in very nice condition inside and out. On a whim before I left New Mexico I swung by CarMax to see if I could offload it to them. They offered me significantly less than what the trade in value was quoted as. It was a bit of a let down.

So, my guess... that's how. Buy low, sell low.
posted by FlamingBore at 4:13 PM on November 30, 2006

I sold my car there for a bit less than what I'd get private party, but considering it took me an hour to walk out with a cashier's check instead of weeks of newspaper ads and sketchy deals and DMV visits, I ate the $500 and called it a day.

Of COURSE they're going to pay you less than what you could get selling it yourself, but I bet it'll be more than a trade in offer from a dealer - my 2001 Civic was about 10% more than any real trade in offers (not the inflated ones from online quotes).

They only take recent cars in very good condition, then sell the majority of them wholesale and reserve the cream of the crop - the ones that require very very little prep and that are in demand - for the lot. That's the trick.
posted by kcm at 4:54 PM on November 30, 2006 [1 favorite]

Are you looking at the real "Blue Book" used by banks? When I got my car, there were three values in it -- something like what dealers get, what dealers pay, and what private parties get, or something. Is Carmax cheaper than all three?
posted by croutonsupafreak at 5:13 PM on November 30, 2006

What kind of cars are they? If they are, say, American cars that don't hold much resale value and can be purchased for cheap, then maybe they are just trying to offload some stock they've got on the lot so they can make room for the imports?
posted by Pollomacho at 5:18 PM on November 30, 2006

I don't know how they do it, but I was very pleased with Carmax - we bought from and sold to them in August. I even said to the sales guy, "I'm waiting for the part where you screw us over." He said, "We just don't do that." FWIW, I got about $1k more for my 8-year-old CRV (125k miles) than I was expecting, and I bought a year-old Highlander that had been a lease car - fewer than 10k miles on it.
posted by Sweetie Darling at 5:31 PM on November 30, 2006

"What kind of cars are they?"

All kinds of cars.

There's a Carmax in Roseville, CA. I sold them my old Chevy Cavalier that had over 140,000 miles on it. I put 110,000 miles on it in less than 4 years. They gave me $2k for it. I was going to purchase another vehicle from them because the whole experience was so stress-free, but didn't because I decided to be a public transit guy for a while.

I don't see a catch to Carmax. They deal in enough volume that they don't have to mark things up as much. If I recall correctly, they're owned by the same company that owns Circuit City.
Oh, wait. Nevermind. Circuit City spun them off, they're now their own publically traded company.
posted by drstein at 5:32 PM on November 30, 2006

I've sold two cars to CarMax, and bought three. I have nothing but good things to say about them. Sure, like kcm, I know I might have gotten a better price (buying or selling) elsewhere, but the lack of hassle is very, very valuable to me. I took a Consumer Reports Used Car Buying Guide with me, and saw that every car on their lot was considered a Best Buy. Their selling prices were at the top of, but within, the recommended price range, while their buying prices were at the bottom of, but again within, the recommended range. I may very well never deal with another car dealer.
posted by MrMoonPie at 7:28 PM on November 30, 2006

Oh, and the financing we got from them on our new Scion xB was better than what we could have gotten anywhere else, and we have excellent credit. I'm a believer.
posted by MrMoonPie at 7:30 PM on November 30, 2006

"Blue Book Value" is usually the "retail" value of a used car of a specific make, model, year with standard adjustments for condition and mileage. A car dealer will have a dealer's book that will list 3 values "Wholesale", "Loan", and "Retail". Wholesale is the value a dealer could expect to pay at a dealer auction and is generally a few thousand less than retail (depending of course on the total value of the car). Dealer auctions are where the vast fleets of lease, rental, and trade-in cars (many new car dealers do not want to deal with the number of trade in cars they get) are sold in bulk. A dealer auction may involve hundreds of cars being sold through multiple auction lanes running simultaneously in just a couple of hours. Carmax will buy cars in bulk through auctions like these paying wholesale value, sell at below retail and still make money on volume. They also contract directly with leasing companies and rental car companies to buy many cars at a time often at below wholesale which saves the sellers the time and expense of auctioning the cars.
posted by tcskeptic at 8:37 PM on November 30, 2006

I was just trading in a 2004 Element and purchasing a new Civic. Carmax offered $11,000 for the Element, or about $1,400 less than the KBB trade in value for a car in "good" condition (which it is). The dealership offered $12,500. Of course, the dealership has more room to play with the price because they are trying to make a sale, but I was still surprised at the $1,500 difference.
posted by na2rboy at 6:24 AM on December 1, 2006

[the following info was gleaned from a presentation by CarMax execs to a local American Marketing Association Meeting]

Circuit City was one of the early adopters of the "big-box" store model. In the late 80's, they decided to expand the scope of their retail offerings into other another area using the lessons in scalability they'd learned from selling concumer electronics. They considered several different verticals, but market research showed that American consumers were incredibly dissatisfied with the experience of buying cars, particularly used cars. The culture of haggling and the lack of trust in both the salespeople and the products was unlike any other buying experience consumers had. The idea behind CarMax was basically, "We know how to sell a lot of TV's to a lot of people, so let's make it as easy to buy a used car as it is to buy an RCA television."

The company was designed to be radically different from the typical car dealership model. For example, their salespeople aren't paid on commission, so the person you talk to on the lot has no vested interest in upselling you to a larger, faster, more expensive model. I'm sure this different pay/commission structure is one reason they can offer such good deals, though they were named one of the top 100 employers to work for in both 2005 and 2006.

We bought a car from CarMax this year, and were incredibly satisfied with the deal we got and the stress-free sales environment.
posted by junkbox at 6:38 AM on December 1, 2006 [1 favorite]

To expand upon junkbox's answer, the December issue of Kiplinger's has an article about Carmax. They explain that Carmax can make lower profit margins work because of the sheer volume: they sell about 8x as many vehicles as the average used car lot (>400 vs ~50 each month).
posted by pmurray63 at 12:17 AM on December 3, 2006