Personal Finance

Why Paying More for Used Car May Be Worth it


CarMax offers a hassle-free used car shopping experience that gives you more options, more confidence and more convenience. But it’s also more expensive.

So is CarMax worth the cost? Scroll on for our thorough CarMax review.

The average car payment in the United States has hit a record high — more than $700 a month ($730, to be exact), per a recent study by Cox Automotive. That’s $8,544 a year on car payments alone, but drivers also need to factor in rising car insurance costs, rampant gas prices, routine car maintenance and even fees like car registration and annual inspections in some states.

And with some new car orders being delayed by several months, used vehicles are looking more attractive.

Buying a Used Vehicle in 2022: What You Should Know

Buying a used vehicle comes with its own set of drawbacks: Drivers are rightly concerned about questionable reliability, less efficient engines, shorter warranties and lack of recent safety features.

And the fear of being swindled into buying a lemon — i.e., a car with defects they didn’t know about — is very real.

Not to mention that used vehicle prices hit an all-time high at the end of 2021 and continue to hover near their new peak. Prices have dropped a bit this year.

If you’re thinking of buying a used car but have little trust in used car dealers (and even less for private sellers), shopping at CarMax or Caravana may have crossed your mind. But is CarMax more expensive than buying from a traditional dealership, and what is the process like?

In our CarMax review, we’ll break down the pros and cons of shopping for a used vehicle at the vehicle retailer and explore whether it’s worth the cost.

Pro Tip

Buying a car can be a stressful, overwhelming task, especially if you need a vehicle ASAP. Our shopping tips and car comparison spreadsheet can make the experience a little easier.

CarMax Review: More Money But a Better Deal?

For our CarMax review, we analyzed the quality of vehicles, their cost compared to the market, the selling process, the convenience of the shopping experience, the overall car selection online, the ease of financing, warranties and the overall customer experience.

Until late 2021, you could buy new and used cars at a CarMax store. However, the retailer has since moved exclusively into the used vehicle space.

Vehicle Quality

The number one reason to buy a used vehicle through CarMax is the quality of the car. Each vehicle undergoes and must pass a thorough inspection — more than 125 details checked — by an ASE-certified mechanic before CarMax will buy it. CarMax flat out rejects any cars or trucks that have flood damage, frame damage or salvage history.

And if the highly trained technicians discover potential defaults during an inspection, CarMax will fix these before the model hits the sales floor, sometimes spending hours replacing parts, removing dents and scratches and even detailing the car.

Some used car dealerships also perform inspections, though not all dealerships are as meticulous as CarMax. Because CarMax franchises represent a large household brand, they are often under more pressure from corporate to only select and sell high-quality automobiles.

Beyond the inspection, CarMax takes additional steps to ensure drivers are more confident in the quality of their purchase. Namely, CarMax allows used car shoppers to take vehicles home for a 24-hour test drive.

Pro Tip

Take the car to a trusted mechanic during your test drive and pay for a basic vehicle inspection. If they find any problems ask CarMax to cover the repairs or walk away from the sale.

And if you sign on the dotted line after the test drive, you’ll also get a full 30 days (or 1,500 miles) to decide if the car is right for you. If it’s not, you can bring it back for a full refund.

Plus, every CarMax vehicle comes with a free AutoCheck vehicle history report.

Vehicle Cost

If vehicle quality is CarMax’s North Star, then cost is the thorn in its side. CarMax makes money by selling cars above their fair market value, plain and simple.

While it can vary from car to car, vehicles at CarMax are generally $1,000 to $3,000 more than you’d find them at a car dealership.

For that cost, you’re paying for intangible benefits like convenience and confidence. But CarMax also offers more practical perks that you can easily recognize, like better warranties, an easy-to-use online platform, and programs that allow you to get a better feel for the car before making a decision.

Pro Tip

Buyer beware! If the car comes from another CarMax location, you might pay a transfer fee, which is nonrefundable. If you decide not to purchase after your test drive, you can’t get the money back.

Selling Process

If you are selling a car, it’s always worth it to try CarMax to see if they’ll give you a better deal than what a dealership is offering for your trade-in. However, dealerships typically pay retail price while CarMax pays wholesale; retail will put more money in your pocket.

Pro Tip

Selling privately, though it is less convenient and more time-consuming, is generally the way to make the most money off your used automobile.

Though the price may not be as attractive, the process of selling your car to CarMax is easy — and you can do most of it online. You’ll just need some basic info like your car’s vehicle identification number or your license plate and registration info to get started.

Because CarMax is more rigorous in its inspection, you may not be successful in selling your car to CarMax if it has many defects or is in poor condition.

Convenience

CarMax has quickly become the most convenient way to buy and sell cars in a post-pandemic world. Without ever leaving your couch (or putting on pants), you can buy a car online — including applying for financing, generating a trade-in offer and having the automobile delivered to your home.

That’s right: You don’t even have to visit a nearby CarMax location to pick up your new set of wheels.

If you’d like to do a test drive in person (highly advisable), you can still handle most of the other details at home. And if you’re a traditionalist who wants to do it all in person, CarMax staff are available in the store and ready to help. There are more than 235 CarMax locations nationwide.

And forget high-pressure sales tactics from the sales staff. They all make a flat rate, so they aren’t incentivized to sell you faster — or to upgrade you to a more expensive model you don’t want.

Selection

CarMax has the largest inventory of used vehicles in the United States. Whether you have a set budget or specific car in mind, CarMax is probably the easiest way to find what you’re looking for.

Shopping online or in the mobile app is very straightforward. Potential car buyers can punch in some numbers — down payment, desired monthly payment and credit score range — to generate an estimated budget, then only see cars that fit their budget.

You can also search by automaker, model or even model year to narrow your search and set the greatest distance you’re willing to travel. The farther you’re willing to drive for a used model, the more options you’ll find available in your price range.

One downside of the broad selection of vehicles available: CarMax sales staff are less likely to be knowledgeable about the specific car you’re after. If you want an informed sales person, shopping the used car lot at a dealership that specializes in a specific brand is the way to go.

Pro Tip

Buying tires for your new ride is inevitable. Here’s how to find the best cheap tires online and in-person.

A car is outlined with money.
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Financing Options

CarMax allows you to pay cash for car purchases or bring your own financing from your preferred financial institution. But you can also take advantage of a third option: a CarMax loan.

In fact, you can get pre-approved for a loan on the CarMax website if you permit them to pull your credit report. While CarMax isn’t clear about its credit score minimum — a minor sticking point in our review — shoppers with bad credit or no credit can typically get approved.

If you get approved, you can easily manage the loan through a CarMax Auto Finance account online. However, it’s a smart idea to keep shopping for a better loan if you’re not happy with your rate. CarMax Auto Finance has an easy three-day payoff program if you find better financing.

Warranty

Every vehicle at a CarMax store automatically comes with a 30-day (1,500-mile), money-back guarantee. That’s immediately better than what most other used car retailers offer.

Even better is the standard 90-day or 4,000-mile limited warranty.

But if you’d prefer an extended warranty, CarMax sells the reasonably priced MaxCare extended service plan. Pricing varies depending on the model and coverage selected.

Nearly 4 million customers have opted into MaxCare since its inception in 2009, and it’s covered over $1.5 billion in claims. Plans are flexible, with deductibles as low as $50 and coverage extending to systems and parts like the engine, transmission, drivetrain, electronics, cooling systems and electrical systems.

Every MaxCare extended service plan includes:

  • Emergency roadside assistance
  • Protection everywhere in the U.S. and Canada
  • Rental reimbursement for covered repairs
  • $50 discount on deductibles when servicing at a CarMax Service Center or RepairPal Certified shop
  • No-contract cancellation (with prorated refunds)

Customer Experience

CarMax prides itself on a streamlined, easy car-buying experience. With no-pressure sales, a 30-day trial and the ability to complete the entire purchase process online, CarMax’s customer experience is clearly better than that of a dodgy used car dealership.

That said, not every customer leaves CarMax happy. A quick google search for “CarMax reviews” will pull up stories of low-quality cars and unfair pricing. It’s easy to focus on the negative ones, but you’ll also find thousands of positive CarMax reviews that reflect the typical experience that CarMax guarantees.

In mid-2022, CarMax had a 3.6-star rating with Consumer Affairs and a 4.2-star rating with Google.

Unfortunately, you can’t truly discover how you feel about the customer experience until you’ve dealt with CarMax yourself. The upside? You can try out CarMax — even buy a car — and still get a full refund within 30 days if you find the customer experience to be lacking. Most other car stores cannot make that promise.

Pro Tip

CarMax is not your only option in this space. Check out our CarMax vs. Carvana comparison to see which vehicle retailer makes more sense for your needs.

Pros and Cons of CarMax

CarMax is not for everyone. If you’re looking to spend as little as possible on a used vehicle, try a private seller or a used car dealership (but buyer beware). But if you value convenience and a more thorough inspection to guarantee vehicle quality, CarMax could be for you.

Take a quick look at these CarMax pros and cons before making a decision:


Pros

  • Higher-quality cars
  • Great extended warranty option
  • Largest selection of used models
  • No-pressure sales process
  • 24-hour test drive
  • 30-day/1,500-mile trial run
  • Free vehicle history report
  • Great customer experience
  • Ample financing options
  • 235+ locations


Cons

  • High used car prices
  • No haggling for a lower price
  • More stringent requirements for sellers
  • Low trade-in offers
  • Less knowledgeable sales staff
  • No clear credit score policy for financing
  • Nonrefundable transfer fees

Should You Buy a Car from CarMax?

Ultimately, deciding whether to buy a car from CarMax, other dealers or a private seller is up to you.

If you value the ease of buying online, a wide variety of cars to choose from and a commitment to higher-quality used vehicles, then CarMax is the best option.

But if you can’t stomach paying several thousand more than you would elsewhere for potentially the same car, then CarMax is not right for you.

Frequently Asked Questions (FAQs)

CarMax is good for people who want better warranties and higher-quality used vehicles. However, CarMax’s prices are typically higher than used car dealerships, which might make it a non-starter for frugal car shoppers.

Does CarMax negotiate prices?

You cannot negotiate the price at CarMax. What you see is what you get. This can alleviate the typical stress of high-pressure sales tactics, but it can also make it more difficult to find a car in your budget.

What are the pros and cons of CarMax?

Some of the biggest pros of CarMax include the large selection of used vehicles, the more stringent inspection process, the 30-day trial, the online car-buying experience and the no-pressure sales environment. The biggest con of CarMax is the higher cost of the vehicles, including the hidden transfer fees.

Contributor Timothy Moore is a writer and editor in Cincinnati. He focuses on banks, loans and insurance plus automotive stories for The Penny Hoarder. His work has been featured on Debt.com, The Ladders, Glassdoor, WDW Magazine, Angi and The News Wheel.




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