CarMax Gross Profit $3,048 per car or light truck

[jake75]

So what gross profit do new car dealers hope to make on a NEW car? Maybe $1,000 including hold back if they are really lucky.That CarMax avg includes new cars and wholesaled cars as well.One might expect that the typical used car retail sale has an average gross margin significantly north of that $3,048. Based on the average price of $13,236 that 3,048 gross margin is 23%.So when you buy a new car and worry about the huge depreciation once you drive it off the lot, think of the 23% instant depreciation on a CarMax used car. [On my '09 with rebates and incentives I think there was -0- depreciation when I drove it off the lot.]Jake-------------------------------------Business First - ColumbusUsed-vehicle merchant CarMax Inc. plans to deepen its push into Ohio, saying it will open two more showrooms in the state next year. The company’s plans were disclosed Friday, when CarMax reported its sales soared and it swung to a profit during its third quarter.CarMax (NYSE:KMX), which operates two stores in Central Ohio, said it earned $74.6 million, or 33 cents a share, on $1.73 billion in revenue for the three months ended Nov. 30. A year earlier the Richmond, Va.-based company lost $21.9 million, or 10 cents a share, on revenue of $1.46 billion.The company said in its earnings report that it would open showrooms in Cincinnati and Dayton in the first half of its fiscal 2011, which begins March 1. CarMax built those stores, as well as one in Augusta, Ga., in its prior fiscal year but did not start them because of general economic difficulties.The Columbus-area showrooms, on Sawmill Road and in Easton, are the company’s only operations in the state.The company sold or wholesaled 130,704 new and used vehicles in the quarter, compared with 118,892 a year earlier. Its total gross profit on the transactions rose nearly 22 percent to $242.9 million and the gross profit per vehicle climbed 14 percent to $3,048 per car or light truck.CarMax also benefited from an improved contribution from its finance operation, which reported income of $65.8 million for the quarter, compared with a loss of $15.4 million a year earlier.CEO Tom Folliard said shopper visits to the company’s 100 showrooms during the three months improved from the same period in 2008, but remains well below levels set in 2007, before the economy slid into a recession. The federal government’s “cash for clunkers” program also may have pulled sales for the quarter into July and August before the stimulus rebate initiative was ended, he said.

[lovemyraffe]

Congrats to a company who is making money right now.

[djb383]

There's a ton of profit to be made in used cars. Here's an example, the local Toyota dealer has a used '07 RAV4 on their lot. I used their online "Appraise Your Trade-in" feature and I put in an '07 RAV4 with the same equipment and miles as my trade-in. The Black Book trade-in value for their '07 RAV4 is $11,045..........they're asking $19,995.

[jake75]

And then they will make someone think they are getting a deal when they lower it to $16,995. Can you post that site - I'd like to check the black book value of a vehicle.

[star_deceiver]

http://www.kbb.com/

[djb383]

kbb is Kelly Blue Book....it's different from Black Book. You might try Google for Black Book. The local dealership here had a link on their website to Black Book as that's what they use for appraisals.

[star_deceiver]

All I kept getting for blackbook was something I had to purchase, or register for and wait for it to arrive in the mail.http://web1.intellipriceauto.c...45202 This one might work.

[jake75]

The dealer links I have seen allow you to input info but then you have to have a salesman call you with the result.

[jake75]

Quote, originally posted by star_deceiver »All I kept getting for blackbook was something I had to purchase, or register for and wait for it to arrive in the mail.http://web1.intellipriceauto.c...45202 This one might work.After you put in info the say your trade appraisal is ready and they will send it to you.

[star_deceiver]

The Canadian black book did the same. They sent me an e-mail with a link to their site. After clicking, said site had all the info, my vibe has an apparent trade-in value of $12'5-$14K. I also read that my info may be used by GM and a representative may contact me...

[Whelan]

The best part about this is that CarMax from what I see is typically a lower price than the dealers for CPO or other models of used cars on their lots. Therefore if they can offer a better price on a car and a warranty, then heck make the cash! Consumer already feels like they are getting a deal.Not to mention they have a much better transport system. Most dealers that try to swap out cars get stuck in battles on which cars they want, whats available, etc. If you get a car from CarMax they post right online what the transport fee is and can get ANY car in the US to your closest store for sale. I'm sure a deposit of some sort is required but hey, what a great system.

[jake75]

Quote, originally posted by Whelan »The best part about this is that CarMax from what I see is typically a lower price than the dealers for CPO or other models of used cars on their lots. Therefore if they can offer a better price on a car and a warranty, then heck make the cash! Consumer already feels like they are getting a deal.Not to mention they have a much better transport system. Most dealers that try to swap out cars get stuck in battles on which cars they want, whats available, etc. If you get a car from CarMax they post right online what the transport fee is and can get ANY car in the US to your closest store for sale. I'm sure a deposit of some sort is required but hey, what a great system.My point mainly was that buying a used car vs. a new one is not as smart a financial choice as many "experts" would lead you to believe.Also, my unscientific observation has been that the no haggle CarMax prices are significantly above what one would pay elsewhere. Used car prices elsewhere are generally negotiable. As for Certified PreOwned, I suspect the dealer CPO warranties are better and also provide repairs at an authorized dealer as opposed to repairs at a CarMax shop. I could be wrong about that.

[Whelan]

Dealer CPO warranties are kinda mute, especially extendeds. I have had two CPO cars never bought a new. The one thing that sucks about used cars is interest rates. You can pay 7% on a used or get 0% on a new, its insane.I just searched CarMax and found a brand new 2009 Toyota Rav 4 Sport loaded for $26k w/ AWD and the awesome 3.5L V6. The Rav 4 Sport with no options starts at $27,300 for 2010. I'd just assume get it new from CarMax.I'm comparing the prices on CarMax to the dealers. Find me a BMW in comparable trim with comparable mileage at a BMW dealer CPO for less than a CM car. They are a couple thousand less easily. I personally hate negotiating for a price, I don't negotiate for my clothes or my dinner bill. Houses are a little easier with offers and counter offers. But cars suck plain and simple. You have to twist them and play like you don't want/need the car, walk away, in order to get them to give you a good price. Forget that, I'm the customer, your job is to sell ME a car that I want. So make it happen, make me happy. I realize everyone needs to make a buck, I'm not saying go bottom barrel on the price, but make it reasonable instead of upcharging so much or holding your guns for the MSRP. MSRP stands for Manufacturers Suggested Retail Price, not what they need too charge. If cars came at a set price, you would see a leveling out where dealers would be more apt to offer better service to keep customers rather than giving them deals. Instead we all build it online, drive it at the dealer, get an initial price, check out consumer reports or edmunds and try to wiggle money off. Too much hassle, I do all my dealings over email. No emotion involved, no face to face, no put in a corner or at a desk. CarMax simplifies it, here is the price, want it or not. That is why they have a better business model it appears. Because the general pop doesnt want to be given run arounds and be pushed and pulled into a deal, tell me what it is, if I can afford it and want it, great. If it's too much I move on. End of story, if you want to change the auto industry, change the way the cars are sold.Let me speak of CPO warranties too. My 02 civic had 70,000 on it with the 100k warranty bumper to bumper. Oil problem develope (1qt. per 1,000 miles). Honda of America did nothing except say they would take the engine apart, check it, if nothing was wrong I had to pay all labor for breakdown and rebuild. So I was to take a gamble of potentially paying loads of cash I didn't have. Great CPO warranty. My 05 Matrix I bought was delivered with old wiper blades, a cracked windshield, low coolant and a headlight out. The dealer wanted me to pay for the windshield and send them the bill, like I have $700 in pocket for this. They sent me new wipers, fluid, headlight bulb and I went through my insurance $0 deductible glass coverage and had them bill it out to the dealer. More hassle, and yes I inspected the car before I bought it, these things were not wrong with it. They drove it from Mass for delivery. And if you are trying to talk about finding deals elsewhere, Pete's Used Cars will always have a good if not better price. But I'm not going to some shanty converted home or old jewelry storefront to get my next car.

[jake75]

Thinking of the motor vehicles I have purchased in the last 9 years I only haggled on one - and that was not much of an ordeal.2001 PT Cruiser -most Chrysler dealers were asking a few grand over msrp to order you one. My dealer was satisfied with msrp and that is what I paid. 2003 Vibe - went to a $49 over invoice dealer.2004 Chrysler SWB T&C - that Chrysler dealer called me - wanted $19,500. I told him that a competitor was advertising the exact same van at $18,500 and if they would take that and give me $9,400 in trade for my low miles PT Cruiser it was a deal. They agreed sight unseen. Later advertised my PT as "exceptionally clean" , priced at $11,900.2007 Chrysler SWB T&C - dealer advertised at $7,088 off msrp. I also had $500 bonus from Chrysler. They offered only $7,000 for my 2004 so I declined and sold it myself for $11,500. (CarMax offered me $8,000. Said he could buy them at auction for $7,000. Similar vans on CarMax Lots were priced at $12,995.]2009 Vibe - ad in Saturday morning paper in early January -essentially $2,000 under invoice for exactly what I wanted - don't know how or why.Called them up to make sure it was not a misprint and was there in 1/2 hour to buy. Also had $3,000 GM Card points. Didn't even ask what they would give me for my 03 Vibe - sold it myself for $9,500 within 2 weeks.

[Whelan]

I didn't haggle for my Civic, my friend knew the guy so he gave me a deal up front. My Matrix on the other hand, the saleswoman assumed I was paying full asking price, riiiight. After telling her what I wanted the car for she said she could not do it. I asked her politely to remove my deposit and I will keep looking. Got off the phone, two min. later the manager calls me and gives me a whole kick about the money in the car, etc. etc. I tell him I want the car but he has to do something better. Back and forth a few times before he finally lets go. It was just annoying because I know they have margins and there is not one single car dealer that has sold a car at no profit. They have money in the front and back. The front money may be low so the margins are smaller and thus bonus payout goes down. But back money for the dealer is always there and never allowed to be touched.

[JetBlack09VibeGT]

Blackbook is a subscription service. Its $397 a year. Their website is:http://www.blackbookusa.com

[jake75]

Quote, originally posted by Whelan »I didn't haggle for my Civic, my friend knew the guy so he gave me a deal up front. My Matrix on the other hand, the saleswoman assumed I was paying full asking price, riiiight. After telling her what I wanted the car for she said she could not do it. I asked her politely to remove my deposit and I will keep looking. Got off the phone, two min. later the manager calls me and gives me a whole kick about the money in the car, etc. etc. I tell him I want the car but he has to do something better. Back and forth a few times before he finally lets go. It was just annoying because I know they have margins and there is not one single car dealer that has sold a car at no profit. They have money in the front and back. The front money may be low so the margins are smaller and thus bonus payout goes down. But back money for the dealer is always there and never allowed to be touched."remove my deposit" - you had to put down a deposit?"front money" - assume you mean the spread between msrp and invoice. Problem is the final dealer invoice is higher than what Edmunds etc. report, the big addition being "advertising". On the Vibe the spread was 5.5% on the basic price, 12% on options, and 0% on destination charge. Then there was $389 added for adv fee, contact fee, and gas. On a $19,480 msrp the invoice was 18,663.48, a $817 spread."back money you can't touch" - assume you mean the hold back. I have read that on Toyota's it is only 2% of msrp before destination charge. Domestics are 3%.Then there are manufacturer rebates - these are transparent.But there are also dealer incentives that sometimes are published on Edmunds, but just as often are not because they are a closely guarded secret. Until recently Toyota used these dealer incentives rather than rebates - now I think they have joined GM etc. and are using both. In addition, there is often extra back money for meeting sales goals etc. Therefore trying to figure out what margin the dealer has is like trying to look at 3 of a 5 card poker hand and decide if you can beat it. A lot of times the best information is gleaned just by looking at the prices dealers are advertising. I think in recent history these advertised price deals are probably at or very near bottom. They might throw in some free oil changes beyond that but not much more.It would be interesting to know how much under msrp you decided to offer and how you made that decision. P.S. 15 years ago I learned that it is often better to take one dealer's special price ad to a competitor. The competitor seemed to be more willing to "match" that price than the advertiser was willing to sell at the price advertised.