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Comment by twblalock | Hacker News Reader

If that was the case, why isn't the same thing happening to Carmax and Vroom and the other Carvana-style used-car dealers?

Used car prices are falling and I assume it would hurt all of them, but it seems to be hurting Carvana more than the others.

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Not sure about Vroom, but carmax actually performs proper car inspections before purchase. They are not moving fast and breaking things.

Not sure about Vroom, but carmax actually performs proper car inspections before purchase.

Those CarMax inspections are so valuable that vultures patrol the parking lot, and if you leave without selling your car, they'll follow you home and make an offer on your car.

It happened to me. CarMax said the car was worth $8,500. I wanted to bring in my other car for an evaluation to decide which one to sell. A guy followed me to the grocery store across the street, approached me in the parking lot and started his pitch with, "I'll give you a thousand dollars more than whatever CarMax offered you."

I asked him if he wanted to look under the hood and take it for a test drive or anything, and he said he didn't need to, because CarMax had already done the hard work for him.

(My life situation changed shortly thereafter and I didn't end up selling either car.)

Haha. In Austin I hear radio ads from a chain dealer (Henna) where they promise to pay you $500 more than whatever Carmax appraised your car at.

Is there any evidence of this? I assumed they buy cars at wholesale auctions, maybe wash/clean them, and put them on sale, like any used car dealer does.

I have asked a couple of used car dealers (not CarMax specificially as there isn't one near here) if they do anything to these cars to prepare them for sale. They just laugh. The margins are not there to repair any problems, so what is the point of inspecting them?

Of course there is.

I detailed cars at a dealership and my friend detailed cars at carmax when we were young.

Used car dealers are bottom feeders in the car sales. They generally have crappier cars than big dealers. I'm sure there are exceptions. When I worked at one they did shady fixes and would never purchase car from one.

CarMax performs multi point inspection. They have their own detailers, paint and repair shops. CarMax knows exactly what they are doing and their business model is sustainable.

Purchasing cars ala carvana is insane. In the car groups people often talk about offloading cars with issues to carvana and them sending a tow truck to pick it up. Zero inspections.

I don't haven't been following CarMax, but CarLotz was another new entrant to the field that went public via an SPAC IPO in 2020 at a value of $1.9B that now has a market cap of around $24M. They are also trying to merge with Shift, which is in a similar state.

Noticing a trend in these "disruptors" in that they can't survive. I'm really not sure how CarMax and these other vendors are even being considered in the same category.

Pardon my ignorance, but why would used car prices necessarily impact a used car dealer? Surely these dealers have to pay more to buy these cars and so their margins should be unchanged? Or is the issue that they are buying used cars and prices are falling so fast that their margins are shrinking?

Because they need to keep the cars on their lots on their books. If car prices drop 25% they lost 25% of the value of their inventory.

Not that car values have crashed 25% or will.

I bet they will crash 25%. On the wholesale market, that might have already happened.

I was seeing 20-year-old Ford Rangers and Chevy S-10s with 200k miles listed on Craigslist for $10k a month ago. If you adjust for inflation that is actually more than they cost when they were new! Pick pretty much any make and model of car and you will see the same thing.

Even just from looking at Craigslist occasionally I have noticed a significant drop in prices for used vehicles in the past month.

They will lose money if used car prices drop because they will have to sell their inventory for less than they paid for it.

Supposedly Carvana went crazy and overbid everyone for cars sight unseen online. This massive inventory is now depreciating at full percentage points on a weekly basis with volume way down.

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