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Report: #149627

Complaint Review: CarMax - Nationwide

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  • Reported By: Tampa Florida
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  • CarMax carmax.com Nationwide U.S.A.

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I dont know if this is a rip off or not, but I think it surely is at least "overblown claims" bordering on Deceptive Advertising.

I am looking to purchase a "Third" car for use by my daughter. In looking we found a very nice 2002 model for what I thought was a decent price.

On their website, Carmax states that they have a "National Base Price" for vehicles. For example, in this case, the price for the vehicle is listed at $12,998 with 32K miles.

Carmax also has listed their "Final No Haggle Price" whic, in the case of this vehicle, is $13,147, after adding their "Processing Fee" of $149.

They then list a "Blue Book Retail Value" from the July-August 2005 edition of Kelly of $14,605 and, doing the math, CarMax then lists a "savings" of $1,607.

That's a fair savings, I thought.

So I asked my rep for the VIN and pulled the CarFax report on the vehicle and see that it has had two owners and milage seems OK. So no problem so far.

Just on a whim, as recommended by the rep, I check Kelly Blue Book's website at autoweb.com. Lo and behold, Kelly Blue Book July -August 2005 edition for my zip code gives the Suggested Retail Value of this model, WITH THE EXACT OPTIONS AND MILAGE, as $12,680. They also state that "this suggested retail value assumes that the vehicle has been fully reconditioned and has a clean title history. This value also takes into account the dealers' profit, cost for advertising, sales commissions and other costs of doing business".

Wow!

Also, states Kelly, "The final sale price will likely be less depending on the vehicle's actual condition, popularity, type of warranty offered and local market conditions."

So, where is the $1,607 savings? Where did the original Kelly Retail value come from?

Doing some due dilligence, I look up three more Carmax cars (And notice that they are begining not to state ANY Kelly values on some of their listings). I find that the Carmax stated "Blue Book" prices range from a low of $963 dollars different (on a subcompace economy model) to a whopping $3160 dollar difference (on a "luxury truck" model).

Doing some more math, the Carmax "No Haggle Price" is always above the published Kelly Blue Book price on Kelly's website on all three vehicles.

So, since there are often company representatives lurking about here on this forum, I pose to you some questions:

- Where did you get the Kelly numbers that you advertise to show "Savings"?

- Why do you recommend consumers look at Kelly in the first place if the numbers dont jibe?

- Where is my "savings" if I buy a vehicle from you at above the price that YOUR OWN REFERENCE (Kelly Blue Book) states is the price for the vehicle IN MY OWN ZIP CODE?

- How can you expect me to trust your "No Haggle Pricing" when there is such a large difference between your stated price and Kelly's own published price FROM THE SAME EDITION OF THE SAME BLUE BOOK?

I dont want to hear about the "value added" by all the inspections and title searching and detail and tune ups and refurbishment that you do to the cars. This is what attracted me to you in the first place, but if you are going to inflate pricing, then Im going to haggle or go elsewhere.

Im sure there are lots of others who would gladly hand over an extra Two Grand to you for the priviledge of driving one of your Certified Quality Inspected cars (which my mechanic can do for me at $60) and Clean Title Guarantee (which I can get from CarFax for $24.95).

So Carmax, show me the money? Where does that $2000 go?

Im still thinking about buying from you. Why should I believe anything you tell me if you so inflate your reference prices and any simpleton can simply check your numbers on the web and discover that...

THERE AINT NO SAVINGS AT ALL!

Lou
Orlando, Florida
U.S.A.

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This report was posted on Ripoff Report on 07/13/2005 03:53 PM and is a permanent record located here: https://www.ripoffreport.com/reports/carmax/nationwide/carmax-dont-know-if-its-a-ripoff-but-might-be-deceptive-advertising-beware-nationwide-we-149627. The posting time indicated is Arizona local time. Arizona does not observe daylight savings so the post time may be Mountain or Pacific depending on the time of year. Ripoff Report has an exclusive license to this report. It may not be copied without the written permission of Ripoff Report. READ: Foreign websites steal our content

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#5 Consumer Suggestion

link to kelly blue book

AUTHOR: Kyle - (U.S.A.)

POSTED: Tuesday, July 26, 2005

Carmax has a link to kelly blue book on there web siteand uses there logo which if you use them as a marketing tool they probably pay them to use them and there system probably automaticlly links to kelly blue book. This is how it is where I work and we have the same issues with customers. Kelly blue book isnt really that accurate anyway as far as what a car is really worth but most consumers use it, try typing in an 03 or 04 with 20000 miles and than type in 200000 and look at the difference. it usally drops the price like 1000 to 2000 dollars, I dont know about you but I'd spend the money to get the one with 20000 miles on it. The best way to get an accurate figure is decide what car you want to buy and look online and in the autotrader and see what they are selling for and life is to short to be nickle and diming it. I hope this helps

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#4 Consumer Comment

CarMax marketing strategy

AUTHOR: Tony - (U.S.A.)

POSTED: Friday, July 15, 2005

In adressing your questions, I must be responsible in saying that I can't be specific in discussing Carmax and why they do some things because I don't know them specifically. I don't want to suggest or make accusations not knowing if they are fact.

I appreciate the fact that you researched the books and concluded the same general differences I pointed out because knowing that lends credibility to my next comment. They use Kelly because it is the most liberal on retail car prices almost uniformly. They likely put it on some and not others because the displayed savings are greater on some than others.

I "speculate" that the reason that the Kelly number they show is higher than the one you found is because the issue they are referencing is older. The values in the books drop monthly and they may not be updating them. It is timing.

Your mention regional differences. These are not actually that great. I can get a unit hauled accross country for $300.00. Most big dealerships have buyers who do allot of Jet time. During the fall months, a 2 wheel drive truck is about $1000 less in say, Wisconsin than in Florida. By the time you pay freight and do the maintainance, as a dealer, you are about even. By the way, I don't do that because snow makes a unit go bad quickly! These factors make the market level out nationally.

A dealer's price must be able to handle a trade. 70% of the financed units on the road are in negative equity. You have to be able to handle that by being able to allow enough for the trade to cover the payoff. If you allow the customer $2K more than the actual value of the car, you must have enough margin on the top to handle it.

You ask about margins. The gross margins (sale price less cost of unit) vary but in terms of hard dollars the numbers a generally static. A gross margin of about $2000.00. If it is a $25K unit or a $7K unit, the hard numbers are the ones that are the same.

A dealer pays 25 to 30% of the gross margin to the sales person. A reasonable average for overhead per unit is $1500.00 per copy. Insurance, advertising, rent, etc as you know is not cheap. A dealer realizing a net income of 2% on sales is not doing a bad job.

Remember, if the dealer buys a load of 10 units, he may have to take losses on 3 of the 10 to get them moved, that is also a large cost of doing business.

Once upon a time I worked for a captive finance company doing dealer pro-forma work.

Best of luck!

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#3 Author of original report

The pricing still doesnt match

AUTHOR: Lu - (U.S.A.)

POSTED: Thursday, July 14, 2005

So, armed with Tony's ideas, I did additional checking on the internet.

Checked NADA, Carmax illustrated "Blue Book" price is $1,698 higher. Worse than Kelly.

Checked "Black Book" (through Credit Union Direct), Carmax illustrated "Blue Book" value is $516 higher, which is the closest of the three resources. So Tony is right, this should be your first resource!

These were all from Florida, although NADA disclaims their pricing as being a "national average" and decries the possiblility of having higher regional pricing (in some cases, they state, Asian vehicles are different on West Coast and 4x4 are higher in the snow belt).

I even was able to get the actual historical retail and wholesale prices for the ACTUAL vehicle I am looking at! At Black Book, you can enter the VIN and it shows up in their database! I did some math and Carmax's margin is roughly 40.3% It tells you the original MSRP and the original Loan Value on the car, too!

Checked it against my wife's car to verify the numbers, and the loan value and MSRP from the sticker is exactly right to the penny! Nice to see her Honda Odyssey is holding its resale value so well!

This is a Great Resource! Bookmark it! ALWAYS get the VIN from your dealer and check it here before dealing!

http://www.cudirect.com/Research/Black_Book.aspx

So, again, where does Carmax get their reference prices?

This is starting to be fun!

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#2 Author of original report

So why add fuel to the fire?

AUTHOR: Lu - (U.S.A.)

POSTED: Thursday, July 14, 2005

Tony:

Thank you for the response and information.

I was aware of the existence of these different books but was not aware of the usage percentages. I will continue my education maybe I will even buy a car someday :)

If I can indulge your sage advice on a few additional explanations:

From a marketing standpoint, I do not understand the reason Carmax posts the Blue Book values on the website on some cars. Any idiot with any sense at all can check their facts with a simple trip to the public library, even if they don't have an Internet connection. It seems they just arbitrarily pull numbers out of their posterior, as the same cars with the same equipment and the same mileage in the same marketing territory have different Blue Book prices!

While I understand that prices fluctuate constantly as you describe in your excellent response, Carmax voluntarily quotes the latest Kelly and in EVERY CASE I CHECK, (and I checked over 25 just today), their quoted Kelly price is always above Kelly's website price.

Regarding profit, that too is a variable. I fully support the capitalist system we have here, but what is a fair profit in the auto industry? I have worked in a few industries, and I can tell you that a supermarket margin is around 3-5%. Badly performing television stations have a margin in the mid to high 20% range and, in the software business, its not uncommon to have margins in the mid to high 90's.

I don't expect charity from any business We are all in this game to have fun and make money and when we are not making money, we are not having fun. But I don't expect margins that exceed cost of sales by more than 15-20%; that's fair to all concerned.

So, if I we're one of your stockholders and came asking, what is a fair margin for a dealer of their size? What is the average profit per unit sold over a month's time to keep the business in the black side of the ledger, in your opinion? Just average numbers, no specifics.

The key to pricing products and services is understanding the market, managing overhead and costs of sales and being able to balance them to continue to add value, not only to the company stock holders, but to customers. This creates repeat business.

A lofty goal, but we are talking about used cars, right?

Carmax seems to always inflate reference prices above their own chosen reference. Where do their numbers come from? Why add confusion to all the pricing stuff when the Internet is so ubiquitous and everyone can check everybody's figures so easily?

Their pricing illustrated a savings around 12% from their Kelly number. But when I discovered the pricing differences, and the street prices for similar vehicles in my area, and the wholesale cost of similar units, it killed the deal for Carmax, and its their own fault, because they actually ADVISED me to check their figures, and its painfully obvious that they don't check theirs, or think the public is to dumb to check them.

And although I really like the car, and would like to buy it from them, this little screw-up has made me suspicious of everything these guys say. I probably wont buy a car from them and I certainly will not buy their stock.

Best

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#1 Consumer Comment

Carmax info that may help

AUTHOR: Tony - (U.S.A.)

POSTED: Thursday, July 14, 2005

Responding to your concerns regarding CarMax, A few pointers may assist.

I have been in automotive finance for 20 years and own 2 dealerships, one being a Ford franchise. This experience should give me the credibility to address your concerns.

Firstly, of the 3 "Books," NADA, Black, and Kelly, Kelly is the least used. NADA is the what the banks use, Black is what the wholesale market and dealers use, and Kelly is the one that customers seem to be obsessed with.

Clearly, the black book offers the closest reality to wholesale and retail prices in the books. You can compare a single vehicle between the 3 and have as much as a $3,000 variance.

You would think these are emperically based from auction and retail delivery reports, but this can't be the case. How many 1995 Ford ex-cab 4.6 litre with 78K miles run through auctions in a month for them to get this info?

Now to the point, the markets change monthly. This month, the value of a 2004 Ford F150 dropped by $4,000.00 because Ford followed G.M. on the family program. The day a brand new vehicle is worth $4k less, the ripple effect occurs down the pre-owned wholesale line. I can buy a 2003/4 Tahoe for $3500 less this month than last because of the G.M. deal. The books can't keep up with the markets because the markets move very quickly.
They are only a guide. I can sell you a 2004 Dodge Caravan for NADA wholesale and make $1500 for myself but (prior to last month) I could not get a Chevy 1500 truck for full retail in the book, most less transport, inspect, service, and sell it to you for a profit.

If you want to see what something is really worth, you will have to shop the dealers against the same unit and let the best one win.

I hope this gives you insight though it does not directly answer the question regarding CarMax and portential deception. If they are being deceptive, it would be difficult to prove.

with regards,

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