I’m waiting for my new civic to hopefully arrive this month and was wondering if I should go with CarMax or sell privately.
Annoyingly if I were to trade it in with the Honda dealer, I would only pay 5% tax on the difference between in price rather than 5% on the new car price. But if I sell it to CarMax I don’t get this benefit. I assume this gives the dealership even less reason to be competitive.
With 43k miles, Kelley blue book says 18,800 is the average and CarMax brought up the same KBB and offers me the max of the range, 19,600. Fine by me, that’s approximately what I paid for it 4.5 years ago
If only there were some way to determine how much 5% of the selling price would be. Also, dealer probably won’t give you 19,600…probably closer to 18,800…so factor that in as well
If CarMax offers 19,600, I will lose 5% of that to taxes, so the net is $18,620 which is what the dealer would have to offer to make me indifferent from a financial point of view. I would probably default to the dealer within a few hundred dollars because I think they will take care of all the transitioning. If I sell at CarMax and want to keep my AK2ARY license plate I think it’s a bit more work on my end.
Also, I’ve never heard of needing a title transfer notarized in MN or IA.
The value of convenience is often under-valued.
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As I mentioned in previous post, my last auto sale was separate from purchase and to CarMax in 2011/2012 timeframe. I don’t remember any extra work for me at CarMax. There was still the extra taxation for two transactions compared to one net price. In my state, you keep the tag from the old vehicle. I have never had a personalized tag, so not sure what it takes here to swap the tag to a new vehicle, and that most likely varies from state to state.
That would be high in my, albeit limited, experience. If someone else is offering $19,600, dealer will probably offer $15,000ish. Which only saves you $750 in sales tax, leaving you roughly $3,850 worse off. Though with a little less hassle.
At least that’s been my experience. I’ve only done this twice though. But I’ve been told by several folks to assume that the dealer will offer 75% of what you’ll be able to sell it to a private party for.
I’m not exactly sure how that is affected by Covid. My understanding is that both numbers are up, so I’m guessing the 75% ratio is still valid, but not certain. I bought my new car early in the pandemic when the pandemic pricing hadn’t really started.
Holy cats… just valued it on Kelly Blue Book’s site. Trade-In Value is almost exactly what I paid for it (slightly higher). Private Party value is considerably higher. I’m not used to cars appreciating! The thing is almost 2 years old and has over 20,000 miles on it.
Not a 75% difference in values though. Maybe that was for lower value vehicles, like the one I was selling before I bought this one. 
Some of this is state specific.
The SOBs that run Illinois have recently capped the sales tax benefit of automobile trade ins at the maximum of a 10,000 trade in. So if you buy a 42,000 car and trade in an 18,000 car, you pay sales tax on 32k (42k-10k) not on 24k (42k-18k). And the sales is likely to be 8% not 5%.
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Here’s a car at my local CarMax:
It has 4,000 more miles than my EX, and is selling for $3,400 more than they are offering me.
So maybe I can do better. I put an ad out on Craigslist and in 15 minutes someone from Texas contacted me, trying to buy it for 19K.
The dealer will have some costs in cleaning/detailing your car, and some admin costs, plus they will make a profit. And there’s no guarantee the car listed there will sell for $23k.
You might be able to squeeze out another grand or so with a bit of legwork, though. I might be tempted to try that. Shrug.
Why is this surprising? Is ~20% markup for costs and profit unreasonable?
It’s not so much surprising as just matter-of-fact. Maybe a private sale can cut down on this expense.
As for the markup, I guess I regularly mark my products up by almost 50% to cover costs and profit. So 20% is a steal!
Part of it is that they could have a list of people who want certain cars. Turning over inventory quickly lowers the fixed costs per car.
As I wrote earlier somewhere, I had a friend trade in his lease early, and they gave him a few thousand for it. Dealer sold it to someone else for a quick profit.
This topic came up yesterday…WTH happened to carvana? CVNA
Around the time I sold my car the stock price was somewhere around 300 on its way close to 400 and now it’s about 5.
Is it their business model? Are they poorly run? Is it a poorly run business model?
I think it is mostly the business model. Zillow had something similar where they used their analytics models to buy houses and try and resell for a profit. They both seemed to buy up overpriced property to try and resell. ZIllow was stuck with the property because few people buy houses without seeing them, and Carvana sold people crappy cars until it damaged their reputation.
For both, the models can’t replace a good physical evaluation by a human.
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I think Carvana had a great idea. They got caught when demand decreased and are getting squeezed with overpriced inventory.
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I think you mean when supply decreased (which was a knock on effect from the chip shortage for new cars). Demand for used vehicles is high.
Making new business models should always include what the worst thing that could happen and how possible it is and what the damage could be.
Car sales business is mainly a word of mouth model, since business doesn’t repeat enough.
And when your business doesn’t even know how to transfer title, that makes for bad word of mouth.
Delivering used cars to customers who have yet to drive it seems like a cost not baked in, as there will be customers who cannot make up their mind. Yes, making customers go to a lot with hundreds of cars to pick one is a more optimal model.
Also, that tower. WTF do those cost?
Preach!