When upgrading to a new (or newer) vehicle and needing to dispose of your present vehicle, should you

• Sell it yourself?
• Trade it in?
• Sell it to CarMax?

The answer may surprise you.

Maximizing Your Money for the Old Vehicle

Sell It Yourself

Years ago selling your vehicle was pretty easy. Place it in a visible location with a “For Sale” sign or advertise it in the local newspaper’s classified ads. Soon you would start getting phone calls if it is priced right. But all that has changed today. Many cities (including ours) have ordinances against parking a vehicle on the street with a for sale sign in the window. Most car shoppers aren’t looking at newspaper ads to find a vehicle to purchase. They go online to Craig’s List or AutoTrader.com.

My experience selling our 2003 Expedition back in 2013 was the vehicle was available to an extremely large number of people and I got so many weird, stupid, and scammer people calling me. The other downside was it may take quite a while to find a ready and willing buyer. So when we decided to buy our new F-250, I didn’t want to go through this process again.

Keep in mind that selling it yourself to a private party is the way you will get the most money for your vehicle. It normally takes the longest amount of time.

Determining the Value

The three most important factors in valuing a vehicle are:

1. Age
2. Condition (cosmetic & mechanical)
3. Mileage

Before selling or trading, you should determine what it is worth. First and foremost, one must be able to objectively determine the vehicle’s condition. If you are emotionally attached to it or are trying to present it as better than it actually is you might value it to high.

One method to determine value is to try and find the average private party selling price for a similar vehicle online. Obviously this can be time consuming. A better way is to use an online value calculator. If you can be objective, these sites have a screen to input your vehicle’s condition. Below is what Kelly Blue Book’s website looks like:

When I started this process, I knew (being in the car business for 40+ years) that our Expedition was in “Excellent” condition, because it had been well maintained, the paint still looked brand new without any scratches, dents, or dings. It ran perfectly. The interior was almost like new. After detailing it, inside and out, it almost looked like it did when we bought it new.

Being an eight year old vehicle with just 63,550 miles on the odometer, I knew it would be easy for a car dealer to sell it for top dollar.  It would be stupid to negotiate a trade-in with a dealer if I did not know what the range of wholesale prices were. Wholesale is the price a dealer buys a vehicle or gives a buyer on a trade-in. So we can call it the “Wholesale/Trade-In Price.”

Dealership Profit

New car dealers also sell used vehicles. In fact, most of the time a dealership will make more profit on a used car than a new one. The price a dealership pays for a new vehicle is fixed. That is, all dealers pay the same price to the manufacturer. But in the wholesale market, the less a dealer pays for a used vehicle, the more profit he can make and there is no standardized method  to determine what a dealer should offer. So basically a dealer will buy at the lowest possible price and re-sell it at the highest possible price. That is capitalism. Uninformed people suffer in this process. If you are uniformed, this article might help you. Informed people can maximize their trade-in value.

Online Estimates of a Vehicle’s Wholesale/Trade-in Value

The three most popular consumer websites are (in alphabetical order):

1. CarGurus
2. Edmunds
3. Kelly Blue Book

Inputting my data into each site’s calculator I was able to get the “estimated” Wholesale, Private Party Sale, and Dealer Retail values. (Kelly Blue Book does not show a dealer retail price). Below are the results of my search:

To take these results into a dealership and try to negotiate your trade usually doesn’t work out in favor of most people. The dealer usually will grade it as fair or less and it becomes a take it or leave it proposition. Dealers know most people will just take it, because they have become so emotionally attached to a vehicle they want to buy, they leave reason behind. Additionally, they get caught and focused on a monthly payment, enabling to dealer to play on this desire to buy a new car today. Dealership salespeople are well trained to maximize the profit on the sale and most buyers are ill-prepared to act in their own best interest. Buyers don’t know how to get the best price for a vehicle.

Tips on Buying if You Need to Finance the Purchase

• Contact your bank or credit union before shopping. Find out how much you want/can borrow and what the interest rate is.
• Get the cash price for the new vehicle from the dealer. DO NOT allow them to discuss monthly payments. Once you get the purchase price, you can figure the payments on your own. There are many online calculators that allow you to input the purchase price, down payment, taxes and fees and the interest rate. At this point, if the dealer offers you financing, you can simply ask them if they can match or beat the interest rate. YOU ARE ALMOST DONE. STICK TO THIS PLAN.
• Now you are ready to negotiate the trade-in. You will probably lose money in this step, because you have no control over the trade-in price unless the dealer is desperate to sell the new vehicle.
• One last thing. If your trade is something the dealer doesn’t want to sell himself (i.e., old, beat-up, high mileage, unpopular model), he is going to sell it to a wholesale auction house, at wholesale price. Meaning he is going to offer you a lot less than wholesale.

CarMax

CarMax is the number one seller of used cars in the United States. Their average gross profit per unit sold is $2,147, according to an Automotive News article published in 2018. They also purchase more used vehicles from private owners than any company in the US, heavily advertising their vehicle purchase program.

So I decided to get a quote from them before I started any negotiations. I read so many negative things about the their purchasing process, and large numbers of people reported they offered to little money and it took an excessive amount of time for the check to clear.

Being I think the general public is uneducated, feels entitled, lacks common sense, and often is plain stupid, I decided to check out CarMax myself by going through the process. It costs nothing except a little time

We arrived at our local CarMax around 11am without an appointment. A sales associate immediately greeted us and began the appraisal process, a process which is so well executed and customer friendly. The associate explained everything and walked us through the CarMax website. Here is the process:

• The associate enters all the customer and vehicle information into a computer.
• A technician inspects and road tests the vehicle.
• The technician uploads the result of the inspection and pictures of the vehicle (inside and out) into a computer.
• All the information is sent to a central location, where professional appraisers determine the value of the vehicle.
• An offer is emailed back to the CarMax location.
• The associate prints a written offer.
• The offer is good at any CarMax location in the US and is good for 7 days.

We opted not to sell at this point in time, but we knew how much we could sell it for. Their offer was $12,000 and more than the three online websites. We would use this to negotiate with the dealership because it would be easier to just trade it in to the dealer.

What we did – the complete process

We decided to buy our truck from the Ford dealership Joyce worked at for 10 years. One of the salesmen, a 30-year friend of Joyce’s handled the sale. He gave us a quote via email that was $1,500 less than the best offer I got from several other dealers online. We were good with the price. So far, so good.

The next day, we went to CarMax and received the offer described above.

The third day we drove to the dealership, which is a 250 mile round trip. The truck was ready and we road tested it. Verified the price and equipment. We told Joyce’s friend that the sale depended upon the trade. Anything less than $12,000 we would wait until we sold it and come back, a process that could delay the transaction up to a week. So we waited for the trade-in offer from the used car manager.

I have to explain how a dealership works. There are usually 4 separate departments: parts, service, used car, and new car. All are separate and report to the general manager or dealer principal. Since the used car manager is responsible for his department’s profit, his appraisals are generally written in stone. Sometimes, if the dealership is desperate for the sale, the general might intervene in the trade-amount, but that is rare.

The used car manager appraised our Expedition as fair, not excellent, and offered us $9,000. Not acceptable. Thinking the dealership might soon have to close due to the coronavirus pandemic, and since salespeople work 100% commission, Joyce’s friend tried to negotiate the price up to what CarMax offered. The best he could do was get a counter offer of $10,000. Salesmen do not get any additional commission on the trade-in, so it was in our salesman best interest to get the $12,000 and sell the truck. No Dice! Here is a comparison table of everything about our trade-in value.

We weren’t going to lose $2,000 on the trade-in. There is a CarMax about 5 miles from this dealership, and even if we went there to sell it, it would take a while for their check to clear. Also, they don’t issue checks, they issue bank drafts that often can take up to a week to clear. Finally, since we didn’t want to drive back home and wait a week and then return, we decided to buy the truck without the trade-in and deal with that later. 30 minutes later we were the proud owners of a new F-250 and a 2012 Expedition. Not wanting to drive two vehicles 125 miles back to Palm Springs, we went to the local CarMax to see if they would honor the offer to purchase as promised by our local CarMax. Yep, no problemo. About 1/2 hour later we walked out with a bank draft in the amount of $12,000.

There are a lot of variables in how long a check or draft takes to clear and funds made available. The next morning, Friday, we went to our bank and deposited the draft. The next day, on Saturday, our online account showed the funds were cleared and available.

Summary

CarMax was awesome. Great process. Speedy. And they followed through on every single thing they promised.

We highly recommend selling a vehicle to CarMax if you are in a situation like ours.