"The Way Car buying should be"? Ins and Outs of CarMax

Just about anything can be purchased at your local mall these days-including new and used cars. Pioneering this trend was CarMax, the self-proclaimed leading specialty retailer of used cars and light trucks, and champion of the consumer's battle against dubious dealership salesmen. Along with new and used cars, CarMax also markets a no-hassle, no-haggle approach to buying a car, as well as peace of mind-for a price. The auto mall's television ads show a boundary-less room stocked with an infinite amount of faultless vehicles-every make, model, color, and year-available within easy and affordable arm's reach to consumers throughout the country. But is it really that simple, affordable, and guaranteed?

From Richmond, Virginia to Nationwide Dominance

CarMax touts "Over 20,000 vehicles in stock." However, the company neglects to mention that this inventory number represents all dealers combined.In 1993, CarMax, originally a division of Circuit City Stores Inc., opened its first superstore in Richmond, Virginia. Selling only used-cars at first, the company's services have extended into many other realms, including financing and vehicle service. Since its inception, it has grown into a 54-store, 9,722-employee chain.

Shortly after the company's takeoff, Carmax entered into franchise agreements with various automobile manufacturers and began selling new cars at select stores nationwide. In October of 2002, CarMax became an independent, publicly-traded company, splitting from parent-company Circuit City. The auto-chain has continued to grow, ousting rivals like AutoNation, who recently closed nearly all of its used-car super-stores or merged them with existing new-car dealerships.

With all this expansion, CarMax must be doing something right. The Virginia-based company's total sales increased 13% to $1.32 billion from $1.7 billion in the first quarter of last year, and they recently added new stores in Indianapolis, Indiania, Columbia, South Carolina, and Los Angles, California. From May 31st, 2003, to May 31st, 2004, the auto chain sold 228,407 used cars and 21,602 new cars, with used-car sales making up 91% of the total vehicles sold.

How it works
The four main tenets of the CarMax philosophy are: Fixed-price vehicles, pressure-free salesmen, certified guaranteed vehicles, and an overall easy, fun car-purchasing process. For some, the CarMax experience begins after surfing the company's website for the perfect vehicle, new or used, by make, model, year, price, and location. Online customers are able to do everything short of driving and purchasing a car: search for it, research it, compare it to others, explore financing and insurance options, schedule a test drive, and email customer service.

The company, however, makes it just as easy for those who use more traditional car-shopping methods and want to browse the lot and showroom. Once the choice is made, any used vehicle listed online or found in any of their lots can be trekked from any store nationwide to the nearest CarMax--though in some cases a fee may apply.

The Perks

• High-quality selection - The majority of their vehicles are culled from customer trade-ins, new-car trade-ins from affiliated dealers, rental fleets, and off-lease vehicles. Most cars are under 6-years old and have fewer than 60,000 miles on them. Older, less-expensive cars on the lot are deemed "ValuMax" vehicles, and have more miles and minor cosmetic imperfections.
• No Gimmics - Along with the huge selection of late-model, clean, low-mileage vehicles are the group's easy-going atmosphere and piece of mind guarantees. A non-commissioned sales associate assists prospective car-buyers in finding a vehicle with a set-in-stone-price, eliminating dealer pricing schemes and over-eager salesmen.
• Fine-tooth comb inspections - Each car goes through a 125-point inspection, and is reconditioned by certified technicians. According to the company, half of the cars they receive in trade fail the CarMax inspection and are sold at wholesale auctions instead of on CarMax lots. Vehicles with frame or flood damage often make up the bulk of this group.
• Pressure-free trade-ins - If you have a trade-in, CarMax offers an on-site, while you wait appraisal and inspection, and gives you a written offer for the vehicle. According to the company, this offer is close to the Kelly Blue Book price for the vehicle, and is valid for 7 days or 300 miles-regardless of whether you purchase a new vehicle through CarMax.
• Warrantees and Guarantees - To further ensure the soundness of CarMax cars, consumers drive off the lot with more than just their vehicles. A 5-day money back guarantee, a clean title guarantee certifying no frame or flood damage exists, and a limited 30-day warranty are included in the price of the vehicle. If that isn't enough, the company also offers an additional-cost extended-service plan for purchase. The "MaxCare" extended-service plan covers vehicles up 100,000 miles or 72 months depending on the vehicle, with service done at CarMax or authorized repair facilities, and added perks like partial towing and car rental reimbursement.

Paying for Peace of Mind
The perks, however, do tend to add up. Driving off the lot with a clean, late-model, low-mileage vehicle with a solid guarantee affixed to the sticker price can add a lot to your bottom line cost. The question is, is it worth it to you? For example, if you are looking for a 1999 Saturn SL2 4-door sedan, in good condition with air-conditioning, cloth seats, CD-player, power locks, windows and doors, alloy wheels, power steering and cruise control with around 60,000 miles on it, Kelly Blue Book reports that the car is worth approximately $5,230 in a private-party sale. Purchased from an independent seller, you have a better chance of buying it close to this price. Go to CarMax however, and the same car with the same options, condition and mileage will cost you around $7,000, plus tax and title fees. Letting CarMax take care of the legwork involved in finding a reliable car will therefore cost around $1,770 for this vehicle.

The chart below further exemplifies the cost difference between a private-party vehicle sale and the cost of purchasing a CarMax vehicle. On the average, CarMax cars cost anywhere from $1,300 to nearly $3,000 more, based on the vehicles selected below.

	'01 Toyota Camry	'03 Ford Explorer	'00 Chevrolet Cavalier	'02 Volkswagen Jetta	'98 Honda Civic
CarMax Price	$12,998	$19,779	$7,998	$14,998	$8,598
Kelley Blue Book private sale price	$10,365	$18,485	$5,005	$12,170	$5,775

This chart is based on vehicles with the same options, specifications and mileage in good condition. Kelly Blue Book's private party value price represents what you might expect to pay for a used car when purchasing it from a private party.

For Everyone?
CarMax touts customer satisfaction at 93%, but it seems like for every good customer experience, there are also instances of negative feedback. One main gripe is the apparent vehicle price hike. All the CarMax extras you don't find when you purchase a used car from the newspaper or some dealerships end up adding quite a bit on to the price tag of the car. Other complainers question the quality of vehicles at CarMax.

Despite the fact that you've put your faith, and contents of your wallet into the hands of CarMax to guarantee the health of a used car, it doesn't hurt to have the car checked out on your own during the company's 5-day money-back return period. Consumers should also get the vehicle identification number (VIN) of the car and check its history. Visit Consumer Guide to obtain a vehicle history report with the VIN of any prospective car before purchase.

Bottom Line
Although consumers benefit from CarMax's non-commissioned sales staff, thorough inspections, guarantees, and user-friendly facilities, is that enough to compensate for the added costs tacked on to the car during its stay in a CarMax lot? For the casual consumer, looking for a no-nonsense, everything's-taken-care-of way to buy a car, the answer is Yes. For the more hands-on car-buyer, however, a little research and legwork could end up saving you thousands. Either way, no matter what you're looking for, CarMax is, if nothing else, a good place to start. The company's unique, consumer-friendly car-selling strategies have turned them into used-car superstore giants, making CarMax deserving of at least a second look.

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