Why I’ll never shop at CarMax

There are two things that you should know about CarMax, and they are very simple. It would be wonderful if these were emblazoned on the glib blue white and yellow sign that haunts highway feeder roads outside major cities. They aren’t, so you have to rely on my folk wisdom here.

Luckily most of us only have to dip our toes (or hang our asses) into the car buying industry once every 7 years or so. Due to some strange obsession with owning and driving different cars, I hang my butt into it more often than the casual consumer, and these two nuggets of wisdom help me keep my buns clenched, and my sphincter unviolated.

CarMax make money by selling things for more than they buy them for. Patently obvious, and everyone has to make a living. It just pays to be acutely aware of how many livings for how many people that CarMax earn. 40 sales associates for the average dealership for example, which sells roughly 3500 cars a year. Factor in wages, rent, marketing, and costs of inventory and you can figure out a few things.

How do they put food on the tables of all these fine folk:

1. They sell their cars at Kelly Blue Book value or above. And if you’re in Austin at least, Kelly Blue Book is so far above real value that if you try to finance your car at UFCU for instance, there will be a significant shortfall between their valuation (typically based on NadaGuide price) and the CarMax “no-haggle” sticker price. Like 10%

2. They low ball you if you try to sell them your car. Of course they do. They buy “wholesale” and sell wholesale and retail. And given that they sell wholesale, they’re going to pay less than wholesale price. Again a difference of almost 10% when I offered to sell them my car versus selling it to First Texas Honda.

So the appeal of CarMax is the shiny show room, the no-haggle policy (which is a turn off to me when I realize that this just means bend over and drop your pants) and the ease of the process for those lacking in time. I admire the professionalism of the employees that I have interacted with there. And I like their high inventory which means you can go and test drive Hummers and Corvettes on the same day.

So maybe I will shop at CarMax. I just won’t buy or sell there.