When it’s time to get a new car, a lot of people want an easy solution that doesn’t waste time. This is the reason why CarMax opened its doors a few decades ago. CarMax is a way to buy a used car in a way that’s fast and easy. The downside? Their inventory is expensive.
The sticker prices at CarMax are a lot higher than most dealerships and private sellers. This is true even if you compare the exact same year, make, model, and mileage of a car at your local dealer versus CarMax. Their inventory is more expensive because they do extensive inspections, they add warranties, they simplify and streamline the car buying process, and they shaped their business around the everyday buyer. For those reasons, I think the cars are worth the extra money upfront.
However, a lot of people don’t know the full story. In this piece, I’ll explain if the cars at CarMax are really overpriced. I’ll give you some background, put things into context, and wrap up with a definitive answer.
What Is CarMax?
CarMax is a chain of car lots across the country. Their claim to fame is that they will make an offer on a car, no matter what. They’re also very lenient when it comes to test-driving a vehicle, and (in my experience) they don’t pressure anyone into buying a car.
Think of your local car dealership, but much bigger. Later on, I’ll explain exactly how big this company is, but it’s pretty massive.
The idea is that these car lots might appear anywhere, but they follow the same rules and have the same environment as any other CarMax that you might go to. If you see a CarMax near a major highway when you’re in an unfamiliar area, there’s a good chance that you’ll get the same treatment you would get at any other.
As a business, CarMax buys and sells cars. They have a website online that helps with a majority of the process, but they’re largely an in-person business. You can have a car shipped right to your house without looking at it, but a majority of their customers at least test drive the car before buying it. You can also do a trade-in just like any other car dealership.
Since their site is so robust, you can take a look at certain cars, but you’ll probably notice that the prices are higher than you might expect.
Are the Cars at CarMax Overpriced?
Regardless of how you look at it, CarMax prices are higher than other dealerships and much higher than private sellers. A quick test to confirm this is to look up a certain year, make, model, and mileage. Check on eBay and then CarMax and you’ll see a huge difference. If you do the same check between CarMax and your local dealership, there’s a good chance CarMax will still be higher.
This is something that most people know, and it’s intentional on CarMax’s behalf.
What Makes the Prices So High?
As I mentioned, CarMax understands that their prices are higher. This might seem like a strange concept, but there are some reasons why this is the case. In this section, I’ll take a closer look at this idea.
The Environment Is Buyer-Centric
When you shop through CarMax, you’ll quickly realize that the whole process revolves around you. I’ll speak more about this in the following sections, but it’s worth mentioning that CarMax has an environment that people are willing to pay more for.
It’s a lot like a more expensive supermarket that offers higher-quality products and a more comfortable environment. People are willing to pay more for this, so companies can easily charge more.
Above everything else, their “no-haggle pricing” raises the overall price of their cars. If you didn’t know, CarMax has a guarantee that the price you see on the listing is the price that you’ll pay (before any taxes or transfer fees).
They want to take the back-and-forth out of buying a car. If you go to a dealership, there’s potentially a lot of room for negotiation. The dealership says a price, you counter with a lower price, and it goes back and forth for a bit. It might mean that you get a car for thousands of dollars less than the sticker price.
With CarMax, there’s no such thing. If their car is listed for $21,000, that’s exactly how much you’re expected to pay for the car.
If you don’t want to go through the stress of negotiation, then this is good news for you. The downside is that you’ll often be stuck paying more for your car.
Just like a lot of other online car stores, CarMax puts their cars through a multi-point inspection before listing them. The goal of this inspection is to verify that the car is in good working order and find any faults.
If you buy a car from a private seller, you’ll need to do this inspection on your own. Without putting the car on a lift and looking at the undercarriage, it’s not possible to know the true status of the car. The seller could be hiding some major defects and they could be selling you a lemon.
With CarMax, you pay a little extra in order to know that you won’t get a lemon. The inspection will outline every problem that the car has, so there are no surprises.
This inspection takes some time and effort to do. As a result, it costs the buyer more.
While you might have a local CarMax dealership, the cars you see listed online could come from any of their country-wide lots. Since the region can also affect the price of the car, this adds even more fluctuation.
A car might be listed for California prices despite the buyer being in Ohio.
This is another benefit of using CarMax, though. Your local dealership only has cars that they found in the area. CarMax has a massive inventory that you can shop through. As long as you don’t mind waiting for transport and paying for it, you can get very picky with your searches.
You can find unique cars and vehicles that have incredibly low mileage on them since the search is so much wider.
Speaking of transportation costs, you’ll need to be prepared for transfer fees. This varies greatly, depending on how far away the vehicle is from you. I did some quick searches just to generate numbers.
A car 100 miles away from me had a $99 delivery fee, a car 200 miles away charged $149 for delivery, and a car 2,500 miles away came with a $1,999 delivery fee.
As you can see, this adds to the total cost. It becomes an even bigger issue as you start shopping from the opposite coast.
The way to avoid this is to pick up the car yourself, you’ll just need to be prepared for a road trip.
A cool feature that I like about CarMax is that they offer warranties on top of the manufacturer’s warranties. In fact, as long as the car is still covered by the manufacturer’s warranties, they will transfer to you after you buy the car.
With CarMax-specific warranties, you can get covered for 30 to 90 days. In the first 30 days, you can get a full refund no matter what the reason is. Within 90 days, CarMax will handle all of the repairs and labor at zero cost to you.
To help minimize the damages on CarMax’s side, they’ll charge a little extra for each sale to cover these warranties. At the same time, their pre-sale inspection helps them to avoid common damages that they would have to otherwise cover. Both of these will raise the sale price of the vehicle.
They Have Big Overheads
Another thing to understand is that CarMax has more than 27,000 employees globally. All of these labor costs as well as the brick-and-mortar car lots add up to a pretty heft overhead.
To help manage these overheads, CarMax will list the vehicles a little higher to help pay these costs. It’s the same logic behind why car dealerships will charge extra for each car they sell. If they can’t afford to pay their salespeople, then the whole business falls apart. CarMax takes this concept to the next level since they’re operating at a much larger scale.
It Makes Car Buying Easy
In today’s economy, convenience comes at a cost. CarMax wants to get you in a used vehicle quickly, so they prioritize ease of purchase. In fact, you can buy a car on their site within a few minutes without any effort on your end.
This convenience comes with a premium price, though. It means that you have to charge extra since there are no negotiations, you don’t have to inspect the car, you don’t have to pick up the vehicle, you don’t need to find private funding, and you don’t need to coordinate with the seller.
If you add all of these conveniences together, you’re left with a more expensive car.
Say what you will about CarMax, but I’ve always been a fan. I think the company does a great job of filling a gap in the market by giving people an easy way to get a car. It’s not right for everyone, but it’s a lifesaver for people who just want a car and don’t want to waste time.
Are the Cars at CarMax Actually Overpriced?
As I mentioned earlier, I’m going to give you a definitive answer to this question. You might think the answer is obvious, but I’m here to throw a curveball.
In my opinion, the cars at CarMax are not overpriced for what you get. Think about the sheer time you’re saving by using their services. I really dislike the whole “no-haggle” thing, but this is where CarMax really shines.
They do a full inspection, they source the cars, they deliver to a location near you, even letting you test drive as many cars as you want, and they aren’t tied to a specific car manufacturer.
What you get is a playground of cars with no tricks. If you calculate the time you save plus the risk you avoid by shopping at CarMax instead of a private seller or dealership, you’re probably saving money in the end.
There you have it — I just talked about CarMax and how I think the cars aren’t actually overpriced based on the benefits you get from shopping with them. If you have more car questions, explore my blog. I also have a list of highly-recommended car products that you might benefit from.