Since 1993, Carmax has become ‘The Auto Superstore' with 195 locations and more than 8 million used vehicles sold throughout the United States. In fact, Carmax's annual sales (retail and wholesale) exceeded 1 million units for the first time in 2016. That makes them America's biggest used car dealer group.
There is no question Carmax is good at what they do, but the million dollar question is, "when I need to sell my car, is there a way to beat Carmax's offer without giving up convenience?" Before answering that question, it is helpful to understand how Carmax really works.
How the Carmax Model Works
At the heart of Carmax's success is an obsession with business discipline and process management. Keep in mind, running a single point medium-size used car operation is a high risk, capital intensive, process-oriented business. Now, magnify that by 195 corporate-owned large volume locations in dozens of unique retail markets. You may only see your local store in action, but Carmax the company is one huge “used cars for sale” machine that cranks out used vehicles across America.
Carmax’s core business is selling late-model cars, trucks, vans and SUVs for a profit. Their business model requires a constant inflow of used vehicles from various sources, making Carmax the largest used car buyer in the country too. There is an old saying in sales, “you can’t sell apples from an empty apple cart.”
Carmax the Buyer - Feed the Machine
A recent search on Carmax’s website showed 86,807 vehicles for sale. A highly efficient used car dealership (like Carmax) will turn its retail inventory every 45 days. That means on average, Carmax needs to replace (buy) approximately 58,000 vehicles each month to maintain inventory on its lots.
So, where does Carmax get the 58,000 cars they need every month to feed the machine? Here are their three primary sources:
Approximately 35-40% of the 58,000 vehicles Carmax sells retail each month involves a buyer trade-in. That brings in about 22,000 vehicles, but not all them will qualify for resale on their lots due to age, mileage or condition. A large share of them will be flagged for immediate auction disposal without being offered for sale to the public.
Cash-For-Your-Car (CFYC) Offers
You may have seen Carmax's catchy TV commercials to let private owners know, “We Buy All The Cars” (old cars, new cars, even Purple Wizard Vans) and "We Buy Your Car Even If You Don't Buy Ours” ('WBYCEIYDBO'). Have you ever wondered why Carmax puts so much effort into buying cars from private owners? Aside from feeding the machine, there is another old saying, “he who has the cars wins the game.” For Carmax that means creating opportunities to purchase as many privately owned cars as possible. Simply put, your car provides them with the highest profit margin.
This is where Carmax would rather not be buying cars because auction prices are higher than the trade-in and cash offers they make to private sellers like you. At the auctions, Carmax is competing against thousands of other dealerships in an open bidding process.
Carmax the Seller - Keep the Best and Ditch the Rest
Here is a very important point to remember: Carmax’s vehicle appraisal model does three things extremely well, over and over again:
- Determines the amount of their offer to you.
- Determines the best place (retail lot or wholesale auction) to sell your car.
- Guarantees them a profit margin selling your car, regardless of its age, mileage, or condition.
Let’s go back to those 86,807 vehicles listed for sale on Carmax.com. All vehicles that make it on to Carmax’s retail lot and website with their no-haggle price strategy are the “Best of the Best" as shown by these recent statistics:
- 77% were 4 years old or newer
- 2007 was the oldest model year
- 87% had less than 70,000 miles
- 119,000 was the highest mileage vehicle
The best of the best bring top dollar at Carmax. We also reviewed a small cross section of their retail inventory and discovered the average difference between wholesale value (based on auction guide) and their no-haggle list price is $4,475. Here is the breakdown by vehicle type and sample size:
Cars (10) $3,300 Trucks (10) $6,100 SUVs (10) $4,900 Crossovers (10) $3,600
Any vehicle Carmax purchases as a trade-in or CFYC that falls outside of their "retail eligible" criteria immediately gets flagged for wholesale auction. According to their website, approximately 60% of all cars they take in are rejected for their retail lots.
As mentioned, Carmax's appraisal model determines the amount of your 7-day offer letter and where your car will be sold. If it is headed to auction, be prepared for your offer letter to be $1,000 - $1,500 below what they realistically expect to receive for it at auction.
How to Beat Carmax Every Time
Remember the million dollar question, "when I need to sell my car, is there a way to beat Carmax's offer without giving up convenience?" The answer is Yes, absolutely!
So, how do I beat Carmax's offer every time? Simple, you become like them by elevating the sale of your car from below wholesale (their offer) to near retail (thousands of dollars higher). And no, that does not mean you have to give up convenience by taking on all the dreaded and dangerous things associated with selling your car yourself on Craigslist, Autotrader or other listing sites. Carmax and many others want you to believe there are only two options available - sell it to a dealer or sell it yourself. That is just not true. There is a third option that moves your car up to retail and puts way more money in your pocket without lifting a finger to sell it. Sound too good to be true?
Ask yourself another question - where are vehicles typically sold for retail value? Correct, at car dealerships. So, the way to beat Carmax's offer (and in many cases, private selling) is by finding retail used car dealerships that will sell your car for you right along side their cars. A place where you can literally turn over the entire retail selling process to a professional, licensed dealer who sells cars like yours for a living.
Final two questions - Do such places exist? How do I find them? That is the easy part - yes, they exist, and you can learn more and find them easily at RetailMyRide.com - the smart way to sell my car.
You may be interested in these related articles:
The Secret is Revealed: How to Get More Money for Your Car, Motorcycle, RV
How Much More Can I Make Selling My Car Using RetailMyRide.com
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