When I sold my last car, they offered me $2k and I ended up selling it the next week for $7k.
Carmax goes after people who are either too lazy to sell it themselves or too desperate and need the money immediately.
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.
There's more than just minutes spent in dealing with private-party sales.
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'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.
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.
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).
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).
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.
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.
All this being said I likely won’t buy a used car again. My 3 other cars were all used.
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.
Today I also learned, via wikipedia, that Circuit City is attempting a comeback.
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.
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.
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.
https://www.dmv.org/articles/income-tax-implications-of-sell...
Note that this is not an official DMV site for any government organization
Sales tax wouldn't come in to play if you just sold your car to Car Max though.
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.
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...
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.
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?
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.
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.
I have since sold the vehicle in private sale. I would have taken $6k +/- from Carmax to sell it on the spot.
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.
Did you sell it to an individual?