No wonder Carmax can pay for Doug's warranty 

Kinja'd!!! "E90M3" (e90m3)
07/22/2016 at 09:18 • Filed to: None

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Doing some unnecessary car shopping I see how they make money. When I was trying to sell the 1, I took it to Carmax and they offered me 12.5k. Here they have a !!!error: Indecipherable SUB-paragraph formatting!!! with less options and only 3k less miles for 17.6k. When you charge a markup like that, no wonder you can stay in business.

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That’s a 5k difference!!


DISCUSSION (10)


Kinja'd!!! Smallbear wants a modern Syclone, local Maple Leafs spammer > E90M3
07/22/2016 at 09:30

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But, they do it so they can HAVE the warranty and back it up. Which makes them a more trusted and respected company. Which means people will pay a little more to go there and take a little less on trade or sale, because they know they won’t get screwed over.

In the long run I’m betting high markup and warranty claims balance out, but because it helps establish them as trustworthy it gives them higher sales VOLUME. That’s where they’re getting their profit from.


Kinja'd!!! DipodomysDeserti > E90M3
07/22/2016 at 09:38

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CarMax always has significantly higher prices on used cars than my local dealers. They also have that “no haggle” policy, so you’re not going to pay any less than they list it for. With the warranty and such, I always felt CarMax was better suited for your every day car owner rather than Jalops. If you know anything about cars, you can almost always negotiate a better price for yourself at a dealership. The benefit I see at CarMax is getting a warranty for an exotic or very high end vehicle. You can buy off-lease CPO BMWs all day for cheap at dealerships, and my BMW dealerships kicks the shit out of any CarMax I’ve been to.


Kinja'd!!! Aaron M - MasoFiST > E90M3
07/22/2016 at 09:42

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5k in markup is high, but not inordinately. 3-4k over acquisition price is typical for an auction car, and that’ll translate to 2k of profit if they sell it in the first month. It’s one of the reasons you got a better deal from Beepi (among other things): they got 30 days of listing your car without paying any holding costs. That’s around $900 you saved for them, roughly.


Kinja'd!!! HFV has no HFV. But somehow has 2 motorcycles > E90M3
07/22/2016 at 09:46

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I'll never even consider buying a car from Carmax. Only because the closest one is 4 hours away, so their warrenties don't do me any good.


Kinja'd!!! DasWauto > HFV has no HFV. But somehow has 2 motorcycles
07/22/2016 at 10:16

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You don’t have to go to them to make use of the warranty, IIRC. From Doug’s articles I gather you can have repairs done at the dealer of your choice (maybe independent shops too) and some if not all will just claim it for you.


Kinja'd!!! shift monkey > E90M3
07/22/2016 at 10:55

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the difference between what they offered you and what they're selling for is not all profit. there are reconditioning costs along with transportation and other costs, so like another commenter said it translates into about a 2k profit margin IF the car goes through their process without any issues popping up.


Kinja'd!!! HammerheadFistpunch > E90M3
07/22/2016 at 11:21

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Carmax is 100% guaranteed* to offer you the least for your trade in, and by a long margin.

*Not a Guarantee, but yeah...pretty much.


Kinja'd!!! DynamicWeight > E90M3
07/22/2016 at 11:32

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CarMax: Anyone can beat our prices!

Never understood why Doug was so excited. He overpaid initially and then bought an aftermarket warranty. You can do that privately for less money. I guess people like carmax because it’s easy?


Kinja'd!!! GolfR Guy > E90M3
07/22/2016 at 12:53

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They’re also really good at cost-cutting. The sales guy at one CarMax I went to in Torrance, CA said their corporate office controls the air conditioning. It was 98ish that day, full blast sun, and inside CarMax was pretty warm. So who knows what other measures they take so they don’t lose tons of money..


Kinja'd!!! HFV has no HFV. But somehow has 2 motorcycles > DasWauto
07/23/2016 at 08:43

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Neat