CarMax ReviewIs My Review Accurate?
You have a few things off on your breakdown of how CarMax operates. They will NEVER show you $8,000 and up it to $9,000 if you don't like it. The mark up includes paying technitians (every car spends a minimum of 12 hours with a mechanic being inspected; tons of man hours) and the assumed commission of whichever sales consultant selling it in the future. The average profit gained on a carmax vehicle is around $1800. I'm not sure where you got $5,000+ profits per vehicle, considering if CarMax buys a car for $15,000 you will probably see it sell on their lot for around $18,600. As a finance manager you should make yourself more aware of competing values. Hey Jeff, I do clearly state that low balling is a practice that CarMax specifically said they do not do and did not make it sound as if they did. I have had people tell me in the past that this has happened to them, but if you are in the business you know how buyers can easily be confused during the buying process. With regards to their profit per car I've estimated in my CarMax review, I'll have to stick to my guns on my estimates of their profits. Unless they have terrible used car managers or put in a ton of money to recondition their vehicles (like thousands of dollars) I can't see how they could not be making this type of profit. Here is an example 2005 Chevy Malibu That 2005 Chevy Malibu LS with 49,000 miles is for sale for $11,998, but retail KBB is roughly $10,300. That car should have been bought for no more than $7,000...A more realistic number is $6000, but let's assume they paid $9,000 for it, which is way too much, that still leaves a $2,998 mark up. Then add for any participation paid by the lender (mark up to the finance rate), warranty profit, GAP profit, etc. and I think my numbers are actually quite conservative. If you could possibly explain to me how they stand to only profit $1,800 on a vehicle that is for sale for $1,600 "over retail" I'd gladly adjust my estimates to reflect a more accurate number. I was a little confused at the end of your email where you mentioned if they bought a car for $15,000 you'd find it for sale for $18,600 (you may have meant $16,600). That would be a $3,600 mark up (minus reconditioning), which is right inline with my estimates. I have been in the car business for a long time and I have worked as both an auction buyer and used car manager, so I know vehicle values. If what you are saying is true about their profit, then they need to fire all their used car buyers, as they are not doing the company any favors and/or their customers. The majority of my CarMax review actually was devoted to more positives about CarMax than negatives, but any unbiased review is going to have to cover both positives and negatives or else it's not much of a review. I've even included a couple links to their site, which I am in no way compensated for. Thanks for writing in, Return to the CarMax Review
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