Are All Their
Great Benefits Worth It?
CarMaXX Profits - How and How Much...
The 2nd of 3 sections in the CarMax Review and Profits guide.
In section one we covered the great benefits of buying a car from them and now it's time to get down to the "nitty gritty" of how much CarMaXX (intentionally misspelled for emphasis) Profits.
Compare their benefits to their estimated profits and you can decide if buying a car from them is right for you. When we're done here and if you decide their benefits are more than worth it, then take a look at section 3 to read three ways to save.
CarMaxx May Profit
- Their "haggle free, low pricing"
As beneficial as their haggle free pricing is to customers that don't like to negotiate, it's also very beneficial to the overall CarMaxx Profit.
I'm basing this information on Kelley Blue Book Wholesale, Manheim Market Report (MMR), knowing the current market and assuming a $1000 reconditioning cost per vehicle.
The $1000 reconditioning cost is a higher figure than average, but I figured I'd give them the benefit of the doubt.
From what I can see, based on the sales prices of vehicles for sale on their website, it looks as if they mark up their vehicles between $3,000 and $4,000 per unit.
In fact, a lot of the cheaper used cars they had for sale were being sold for above Kelley Blue Book Retail value.
That doesn't sound like much of a bargain to me. Although, in their defense, their vehicles really look very well reconditioned.
On the other hand, the trucks and SUV's they had listed appeared to be offered for sale at roughly a 10% (still a $3,000 to $4,000 mark up) discount of Kelley Blue Book Retail.
10% is not a huge savings, but if you like everything else they have to offer this isn't terrible. If you like to negotiate the best possible deal, then they are probably not for you.
- Low Balling Your Trade In
The practice of "low balling" is actually specifically addressed on their website and they claim that this is a practice that they do not participate in, which they very well may not, but here's what to look for...
They may have truly done away with the practice of low balling, but I have heard complaints in the past of them doing this.
Low balling takes place when a dealers used car manager puts a value on a trade in and the salesman shows the customer a lower number for the trade, which in turn increases the profit of the deal.
I'd like to stress that I am not accusing them of doing this now or in the past. I can only speak of what I've heard from some of their past customers.
Whether they do or they don't it's something to watch for. You'll know they are doing this if they show you $8,000 for your trade and if you're not happy with that they show you $9,000 for your trade.
Why didn't they give you $9,000 up front if it's no haggle?
- Finance Mark Up
They may show you the financing as it's approved, but with their size I'm sure they have negotiated, with whatever lenders they work with, to have a pre-set mark up on your finance rate.
Based on some of the pricing I've seen with their vehicles, they probably have to run a lot of business through their own finance arm, which is CarMax Auto Finance.
Most lenders will not loan money on a vehicle if the deal is way out of line. In the case of some of the cars they sell, you'd either have to have a large down payment, or they'd have to finance it themselves.
With a $3,000 to $4,000 mark up in a vehicle it makes a lot of sense for them to do this.
I am assuming they have about a 1 point rate mark up on any financing that they arrange for you. This probably equates to about $400-$500 in CarMaxx profit per deal. It will depend on the amount financed and the term of the loan.
- Aftermarket Sales
This includes extended warranties, GAP Insurance, Credit, Life and Disability and a slew of other potential products.
I will only discuss warranties and GAP Insurance in this section, because outside of that I'm not sure what products they might offer you.
For extended warranties, I'm assuming they have between a $500 and $700 mark up.
For GAP Insurance, I'm assuming they have about a $300 to $400 mark up.
Assuming you opted to buy the vehicle, buy the vehicle extended warranty, buy GAP insurance and arranged your financing through them, then in my professional opinion you can expect CarMaXX to profit a grand total of:
$4,200 on the Low End!And...
$5,600 on the High End!
That seems like a pretty hefty profit when buying a car, but use this how you see fit...
Now that you know the estimated CarMaXX Profit,
What would you like to do next?
Or you can...See the CarMax Profits and Review table of contents by returning from -
CarMaxx to the Profits and Review TOC
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