Originally Posted by
Filthy
CarMax and Carvana buy all of their inventory from the EXACT same places that Bob Moore, Bob Howard, Smicklas, Hudiburg, Eskridge and all of the other OKC area dealerships secure all of their inventory from. The exact same pool of cars, dealer auctions, factory off lease sales, rental fleets. Period. There's no magic sauce, that CarMax or Carvana sprinkles over their inventory that makes them better/nicer/less prone to mechanical malfunction.
At the end of the day, CarMax and Carvana are great business models, because they cater to individuals who are scared/insecure and/or nauseated by the thought of having to deal with a real live salesperson. And clearly, there are a lot of those individuals out there. So kuddos to them.
But the fact remains the same, one of the main reasons CarMax and Carvana are such great business models is that they hold their margins, by offering their no haggle/no hassle experience. On a like/like apples to apples comparison, 9 times out of 10, you can step foot onto any pre-owned lot here in OKC, and walk away with a better out the door final price on just about any make and model car, that is just as nice, or possibly even nicer than whatever Carvana has to offer.
Easiest example-
Lets say there are a handful of 2016 Lexus IS cars at an auction. (Offered by Lexus Lease return)
Carvana buys one, and Eskridge Lexus of OKC buys one. (2 cars, sitting right next to each other, at th same auction, with pretty much exact same history. No accidents, perfect carfax, blah blah....etc. Just for fun, let's say they both pay exactly $25,000 for their cars.
Carvana sets their profit margin at $4,000 and parks it in a vending machine, and online for a No haggle/No Hassle price of $28,998.
Eskridge Lexus of OKC sets their profit margin at $7,000 and parks theirs on their lot and online for a price of $31,998.
This is where you enter in the two different types of consumers/personalities/mindsets.
The CarMax/Carvana type B consumer, will see both posted online and seeing that the Carvana price is already a great deal. They will go and buy that car, and be happy with their purchase, love the total experience, and tell everyone that will listen how great of a deal they got. (Paying $28,998)
The traditional type A consumer, will see both posted online and agree that the Carvana price is better. However, they decide to also head down to Eskridge Lexus, to see what they can buy that one for, before making a buying decision. Walking in, telling the Dick Cheese sales guy or manager, that they know that Eskridge only gave $25,000 for the car, and they can either sell it for $25,500 and put a deal on the board...or lose a customer to the Lexus store in Dallas. They will then buy that car, and not feel like they need to tell everyone how great of a deal they got. (Paying $25,500)
Rinse/Repeat
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