I sold my truck last week to them for 16200. KBB online "instant offer" was 18k. I went to the dealership that KBB directed me to and their official offer was 13000. The salesman told me KBB's offer wasn't official and was just meant to get me to their lot.

So I went back to carmax and sold it for the 16200. I might have gotten a bit more on Craigslist or eBay but my time is worth more than that. Whole transaction took less than an hour.

Your time is worth more than what, exactly? How many hours of work is worth an extra $1000?

Apart from CarMax, there are essentially two routes for selling a vehicle. The first is a private sale, which basically involves taking on a temporary, part-time job to have people meet you, test drive your car and then negotiate for the correct price. Craigslist makes this easier, but it's still intense. I'd love to see hard data on the amount of effort involved in private sales, but from anecdotes from friends who have done it, a person can easily invest tens of hours in attempting to get the vehicle sold on the market. That adds up to $1k fairly quickly. Private sale makes the most sense as a hobby. (I'll note that some startups like CarLotz exist that basically have a consignment model for private sales that may work slightly better in certain circumstances.)

The second route is the "trade-in." Most dealers almost never pay cash for the amount of money that they offer for trade-in. It's purely a negotiating tactic meant to make a buyer feel better about a (relatively arbitrary) price on a car ("$14k for a 2015 Ford Focus is kind of high, but we really like that we're getting $4k for our 2007 Pontiac Aztek!"). Whenever you work with a dealer, you're almost always getting fleeced. Again, some people enjoy the process as a sort of game or hobby, but you're likely not making a profit unless you're extremely good at it.

EDIT: I read this over and it sounded a little fanboyish. I want to make clear that I've been gone from CarMax for almost 5 years and I don't own stock or have any other financial stake in their success other than some friends who are still employed there. I just think they're a good company (although I didn't love working in IT).

Private sales are generally fairly easy if you have a normal, common car selling for under about $7000 (depending on location). A lot of people can scrape together that much cash. But more expensive vehicles take a lot longer to sell. The buyers are more picky, and most of them need some form of financing which complicates the sale.

One trick with dealers is to never mention a trade in until you're almost at the end(or defer discussions about it). That way you leave open the option to leave the trade-in out of the deal and force them to give you a number without it factored it.

Also, never do the 4-box and have your financing sorted out up-front if you're not doing cash. Any chance they get to adjust more than one number is when they'll adjust the terms in their favor.

...Maybe, if you find the right buyer, after you publish address to and meet with who knows what sort of people, and possibly deal with scams that will try to rip you off of the entire value of the car and possibly more...

There's more than just minutes spent in dealing with private-party sales.

There is no guarantee of market efficiency for single sellers, and while you aren't being explicit about it, I suspect that your belief that people are rational about selling their vehicles rests on a view that this markets efficiently determine price.

Forgive me for inferring too much from your statement if I am, but this is exactly the kind of situation in which the zero arbitrage principle doesn't apply. if I make a bunch of offers to buy a car for less than it's worth, then all I need to do is find one person who is selling that car and not shopping around. There's no reason to expect any market forces to govern that transaction at all.

There is no reason to believe that selling your car for whatever the first person you find offers is likely to give you a fair price.

I think you're reading way too much into it.

I'm basically speaking from personal, anecdotal experience selling (and buying) a few low-end cars via Craigslist and equivalents.

I have other things I'd rather do with my time than either handle a bunch of prospective buyers inspecting, test driving, and low-balling my car (and dealing with potential fraud), or myself inspecting, test-driving, and low-balling other people's cars, even though that may be a way to save/earn some money.

From an economics point of view, the transaction costs are significant (even if not dollar-denominated), so the arbitrage opportunity exists for someone who can minimize or simply disregard those costs.

just because associated costs exist doesn't mean that they are reflected in the offered price. In order for that to be the case you would have to make a zero arbitrage argument, which doesn't apply to markets where sellers simply sell to the first buyer offer.

I'm not sure why you keep bringing up selling to the first offer and zero arbitrage.

goatherders and I both described working with multiple buyers, and that finding the right buyer (that is, the one who will pay you $1,000 more than some other buyer) requires time and effort. When considering whether to accept an offer on the table or hold out for a better offer, the seller implicitly or explicitly considers the transaction costs (search, delay, processing, risk, privacy, etc.).

This implies non-zero arbitrage, multiple offers, and market inefficiency.

Accepting those risks and developing the confidence to buy and sell stuff yourself can be pretty profitable, and and comes with a sense of independence that can be very valuable.

...and you can do it a lot and have a profitable hobby of buying and selling cars, unless you'd rather spend your time on other things.

> How many hours of work is worth an extra $1000

Let's say it's an extra 12 hours to sell via private party (posting pics, meeting people, haggling, etc). That's $80/hr. You may not actually be earning that whole time, but it's also opportunity cost for doing other things you may value more (time with family/friends/etc).

I've got a car for sale right now for $31k. It's not listed widely (just an enthusiast forum) and I've had a couple nibbles after about a month, one guy test drove it and seems really interested.

I also just changed the oil and am considering changing the differential fluid.

I've already put multiple hours into listing, uploading pictures, meeting the guy to test drive, responding to texts, phone calls, etc.

Because of the relative value of the car, I intend to meet the buyer at the BUYER'S bank to do the paperwork and see the cashier's check drawn in person (there are lots of cashier's check scams these days).

Assuming I sell it to the interested buyer, it's a fairly conservative estimate to say it'll take me 6-8 hours with the one buyer. If I list it more widely on, say, craigslist, I get to deal with finding time to meet a bunch of tire kickers, THEN finding the time off work or on a saturday morning to go to the bank to do the transaction.

In California, if the vehicle is 5-6 years old or more, the seller is also responsible for getting the car smogged; likely if you took it to a CarMax type place they'd take care of all of that stuff for you (just a guess though).

In the end, I am LIKELY to make, say, $5k over what a dealer would offer me, but there's no way of being sure that I'll get 1 cent over what a dealer would offer.

Ultimately it depends on the market. I only buy fairly unusual cars; my previous car took me 4-6 months to find, the car I'm selling took 4 months to order. I once took 6 months to sell a purple M3.

Done right, enthusiast cars hold their value well, but the target demographic is smaller so they take longer to sell.

If you don't mind me asking, what car are you trying to sell for 31k?

Golf R

For us deal hunters the thrill is in the hunt as much as the purchase. Recently bought a new car for 7k off MSRP. I live in Georgia and found the exact model in Virginia. I only told them about the Virginia offer at the very last second. Had the offer printed out and in hand.

All this being said I likely won’t buy a used car again. My 3 other cars were all used.

I was a CarMax "IT associate" once upon a time.

First, CarMax itself is a great company and they do good work. I'd recommend them to anyone who is either not a good negotiator or who can't afford to invest in the typical car market activities.

As other commenters have mentioned, the two major variables that matter to CarMax are the age and number of miles. CarMax will buy literally any car. For almost any vehicle, CarMax will immediately put it in the auction lane whenever it has more than 100k miles or is over 10 years old. In fact, a lot of their employees ("associates") would make a game of finding an older car with low mileage that they could snap up with CarMax's associate discount.

As the article mentions, CarMax makes on average $2k gross profit per (retail) vehicle. CarMax wants to move inventory quickly, just like any normal retail operation (including its deceased parent company Circuit City). If a vehicle is priced too high, its price will be reduced until it can sell. Thus, CarMax attempts to minimize any unforeseen problems that may occur during the reconditioning process, as these can make the cost (to CarMax) balloon out of control. I honestly wish I could say more about the strategy and analysis that CarMax puts into this. It's truly remarkable to behold.

So, yes, you can sometimes get much more for a vehicle on the open market if (1) you've got a car that's outside the parameters of what CarMax puts on the front lot and (2) you're willing and able to negotiate for a private sale.

CarMax was originally created under Circuit City? I had no idea! Interesting that they were able to succeed when CC crashed so hard.

Today I also learned, via wikipedia, that Circuit City is attempting a comeback.

This is just anecdata. We bought a used car at Carmax and they gave us way, way, way above bluebook value for our trade-in (and all other offers, too -- and we were pretty aggressive in researching trade-in offers at other places and were prepared to be underballed by Carmax).

My anecdata is no more useful than yours. Unless someone provides some actual reliable data points to produce a real, known trend, there's no proof here.

My experience was similar. I sold a 2006 to them that had major visible rust issues. The KBB was 1650, they gave me 1600. I was surprised they bought it at all to be honest.

A trade-in is not the same as an actual sale for cash.

If you indeed got a great deal on the trade-in it just meant you got less of a great deal on the other components of the sale.

As far as I know, CarMax doesn't negotiate on the price. The price they list is the out the door price. So it's not like OP walked in and they added document fews and headlight fluid fees. He knew the price he was going to pay for the CarMax car, and was pleasantly surprised with the trade in value of his old car.

Since we're telling anecdotes, I brought in a 1999 Honda Prelude back in 2005. They offered me $6k. I sold it on eBay for $11k.

Completely agree with user cstejerean here. You didn't say anything about your car, but I will hazard a guess that it was over 10 years old, but still a somewhat rare or desirable vehicle. Carmax doesn't want vehicles over 10 years old.

Also, to other commentors here, consider tax implications when you compare sale price on a trade-in. If you wind up paying taxes on the sale of your vehicle, that may offset the increase in price on a private sale.

Don't buyers pay the sales tax?

It appears that I had an incorrect assumption:

https://www.dmv.org/articles/income-tax-implications-of-sell...

Note that this is not an official DMV site for any government organization

When you buy a used car, you pay sales tax on the purchase price less the value of your trade in. So effectively, you need a private sale offer of at least the sales tax rate higher than the trade in offer to break even.

Sales tax wouldn't come in to play if you just sold your car to Car Max though.

If Carmax offered you 2k then the car you were trading in was not something they were interested in, so they probably offered you what they could get at auction for it. There are certain things for which you don’t want to use carmax. Also, did you sell it private party for $7k or was that at another dealership?

I’ve bought and sold a decent number of cars over be years and carmax has routinely offered the best price I could get from any other dealership, but it depends on the specifics. I may trade in my heavily modified Jeep Wrangler next and that’s not something I would bother with carmax for. They don’t generally sell modified 4x4 rigs, so they’re likely to flip it at auction and therefore make a lowball offer. So I’m going to go to a dealership that specializes in what I’m selling.

That's a classic used car tactic, and it's amazing how folks still become fixated on the price they'll be able to buy something for without realizing the price difference will come from the amount they receive from their 'trade-in.'

Trade in, also financing.

Oh yea, definitely that too. Though it requires a bit more than subtracting two numbers to figure out you're being taken advantage of, so it's less obvious for folks who haven't done math in decades (more people than you think).

Exactly. This is a point the article misses. I do believe they mark up the sale price similarly, but probably make even more margin on underpaying for their inventory.

Separately, I find it ironic that the term "no haggle" has been now socialized to mean "buyer friendly". Certain segments of the population have fallen for it, hook, line and sinker. In reality the notion that they refuse to haggle (i.e. refuse to lower our prices) should be viewed as anti-consumer. At least that's how I take it. I'd never, in a million years, buy something that high in price where the price couldn't be negotiated.

Lastly, the article [1] that's linked to in OP's article is actually more fascinating in my opinion. It describes a California court ruling against CarMax's inspection policy and how it violates 2006 California Consumer Protection statutes. Pretty interesting.

[1] https://jalopnik.com/california-court-says-carmax-certificat...

No haggle, if genuine, means that there's less information asymmetry between buyer and seller.

A buyer can look at a variety of places and see real prices, and thus have a gauge of the market. If everything is a negotiation, you'd have to invest considerable time negotiating the 'true' values, or else estimating based on general market knowledge. In either case, the buyer has to work much harder to gather information about the market.

A reduction in information asymmetry should work strongly in the buyer's favor relative to the old system.

It's true: with haggling, the buyer is at a disadvantage if they don't have the time to gather information. But isn't that like with supermarkets, where the buyer is at a disadvantage if they don't have the time to clip coupons? In both cases, the point is to let people who have more money but less time subsidize people who have more time but less money, so that everyone can obtain the goods even if they don't quite pay the average price required to keep the business afloat. I should think that if you're against one of these tactics (haggling), you should also be against the other (clipping coupons). Curious if that's the case.

Dealers really don't like to give you give you an offer good for more than a few minutes, let alone in writing. Coupon prices are published in a separate venue, but still published.

Couponing for groceries is a pain in the ass, so enough people don't bother to do it, and that makes for a stable balance of people paying too much and people paying too little. With something as high value and infrequently purchased as a vehicle, finding a coupon in a separate venue is something almost everyone would do if they knew about it, and so it wouldn't achieve the necessary balance. Whatever the tactic is (haggling, couponing, who knows what they'll think of next) it has to be a sufficient pain in the ass for this concept (letting people with extra money and no extra time subsidize the opposite) to work. Not everyone agrees with this concept (stealing from the rich to give to the poor, welfare, however you want to think of it) but at the end of the day it makes for more people being able to purchase.

Shopping for outside financing and declining the prepaid maintenance contract are also things everyone would do if they knew. They are well documented in any kind of “how to buy a car” article, yet most people don’t seem to know.

You see it as people being suckers, I see it as not having time to fuck around with shady dealer tactics, Craiglist joyriders and tire kickers.

Sometimes you don't have 20h+ to dedicate to those shenanigans. In that case if CarMax comes within some Delta of KBB/etc I fail to see how that's "anti-consumer".

I've sold cars pretty much all different ways and found CarMax's proposition to be pretty reasonable.

> In reality the notion that they refuse to haggle (i.e. refuse to lower our prices) should be viewed as anti-consumer

Lowering prices isn't the same as haggling. Haggling is going to see some salespeople lowering the price more or less for some people vs others, and open them up for a massive discrimination class action lawsuit.

> salespeople lowering the price more or less for some people vs others

Agreed. Why must that naturally lead to the idea of discrimination? If I'm selling a car privately, and a buyers arrives and agrees to pay my full asking price, have I discriminated against him, even though I know secretly I would have taking $1k less than asking, had he merely asked?

if you're a larger company, defending yourself against charges of allowing discriminatory behavior would just be too costly. why allow it?

This is spot on. They offered me $6500 for my car, which was way below blue book. I sold it on Craigslist for $9700 a few days later.

You will always be able to get more money on a private party sale than trading into a dealer. Did any other dealership offer you more than $6,500?

Yes, another dealership offered me $7500. CarMax was by far the low ball offer.

What? It's 10%, and definitely non-trivial.

Of course they won't give you private sale value; they're buying it to resell.

I had the same experience earleir this year. I had a 2012 Mini Cooper with 50k miles on it. KBB dealer trade in was $6k, private sale $8k-10k. Carmax offered me $2k for the car. They showed me the KBB "instant offer" that was for $1.8k.

I have since sold the vehicle in private sale. I would have taken $6k +/- from Carmax to sell it on the spot.

Not sure this is true. This is just a single data point, but a couple years ago I tried to sell a relative's car. CarMax offered more than the dealer did.

You can nearly always get more money for your car selling it directly to an interested buyer, of course, but when comparing CarMax to traditional dealers, they seem to be on par or better.

Car dealers don't use Kelly blue book, they use either black book or "MMR" (Mannheim market report).

You can go to Mannheim and see auction results from the previous weeks and see what your vehicle is going for. Print it out when you go in, they are saving the $500-$1000 cut Mannheim takes.

> I ended up selling it the next week for $7k

Did you sell it to an individual?

Greed goes both ways. Tempted to haggle with them knowing their fat margins, especially near end of quarter when salespeople are focused on cashflow now not profit next quarter.