Carmax Competitors and Alternatives: Who Stacks Up Against this Car Dealer?

Brent Davis - May 21, 2021

Carmax Competitors
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Your child has just turned 16 and is eager to find their independence behind the wheel of a car.

As their parent, you already have plenty to worry about, and now you’ll fret every time they ask to drive.

It’s sensible for your child’s first car to be used, but where are you supposed to purchase a pre-owned vehicle without the headache of sleazy car salespeople, or even worse, ending up with a lemon or unsafe car?

Carmax Competitors

The pre-owned vehicle industry, like Carmax and its competitors, is healthy and thriving.

The market size of the entire industry generates annual revenue of $153 billion.

Approximately 41 million used cars are sold every year, and the market shows no sign of slowing down.

Carmax’s Biggest Competitors

In such a substantial and competitive market, pre-owned vehicles have consistently been the preferred type of vehicle purchase for its fiscal benefits.

Pre-owned vehicles are typically less expensive and do not depreciate as dramatically as a new car.

The best way to save money is to buy a used car; Carmax and its biggest competitors know this.

Carmax’s biggest competitors include Carvana, Autotrader, and Cars.com.

And with that, let’s get under the hood of these pre-owned car companies.

 

Carmax Competitors: Carvana

Carmax Competitors

Carvana began in 2013 as a subsidiary of DriveTime and became an independent company in 2015.

Headquartered in Tempe, Arizona, it is an online retailer for pre-owned vehicles.

Buyers can opt for Carvana’s in-house financing options.

Customers can choose to have a vehicle delivered or pick up at any of the company’s vehicle vending machines.

They offer a seven-day return policy, customary of many used vehicle retailers.

Carvana was one of the first companies to offer online car purchasing and delivery right to the customer’s doorstep.

Carvana made its mark in the used car industry with its unprecedented multi-story vehicle vending machines.

Carvana targets those that despise the traditional vehicle-buying process by instead making it easier, faster, and less painful – like buying from a vending machine.

It is one of the fastest-growing companies within the market, boasting nearly 4,000 employees and reporting revenue totaling nearly $4 billion.

Carmax Competitors: Autotrader

Carmax Competitors

Founded in 1997, Autotrader is headquartered in Atlanta, Georgia.

A subsidiary company of Cox Automotive, Autotrader purchases new, used, and pre-owned vehicles from private owners and dealers to list on their online platform.

Autotrader seeks to serve its customers beyond the vehicle, including reviews, advice, and automotive comparison tools, in addition to listing financing and insurance options available.

Autotrader is strictly an online marketplace for cars and is relatively small compared to its competitors.

It has just over 850 employees and generates just over $1 billion per year.

 

Carmax Competitors: Cars.com

Carmax Competitors

Cars.com is an online automotive classifieds company founded in 1998 and headquartered in Chicago, Illinois.

One of the leading automotive classifieds websites in the United States, Cars.com also operates NewCars.com, PickupTrucks.com, Auto.com, DealerRater, and Dealer Inspire business divisions.

Cars.com serves and the parent company for DR Media Holdings. 

Cars.com primarily works to connect potential car buyers and sellers on its site.

Unlike its competitors, Cars.com does not own any of the vehicles listed for sale.

It turns a profit by selling online subscription advertising products to car dealerships and automotive original equipment manufacturers.

The company has about 1,300 employees and brings in annual revenue close to $607 million.

 

What is Carmax’s Advantage?

Carmax was founded in 1993 as a subsidiary of Circuit City stores and is headquartered in Richmond, Virginia.

With over 200 locations in the United States alone, Carmax is the largest used-car dealer in America.

To date, it has sold over nine million cars, employs over 27,000 employees, and sells both new and used vehicles.

Carmax provides its customers with a range of vehicle choices, including domestic, imported, and luxury cars.

Their success is a result of two segments of their business: automotive sales and vehicle financing.

Carmax purchases used vehicles from owners and resells them at fixed, no-haggle prices.

Their no-haggle model sets them apart from all other dealerships. Prior to sale, Carmax completes safety inspections to ensure quality standards.

Vehicles deemed unfit for sale are sold through auctions and licensed dealers.

Carmax also offers its customers financing options through third-party providers.

Depending on the customer’s credit history and other relevant data, Carmax receives additional revenue and profits by offering this service to its retail customers.

Carmax’s biggest advantage is its online and retail presence.

Potential buyers can browse online, place a car on hold, and test drive the vehicle before signing any paperwork.

Most other online retail car companies cannot allow a customer to test drive a vehicle prior to purchase.

Carmax also offers a seven-day money-back guarantee, matching and exceeding its competitors’ offerings.

Carmax’s Biggest Competitors: Final Thoughts

Carmax’s biggest competitors include Carvana, Autotrader, and Cars.com.

Carmax maintains its majority hold of the market share by offering new, used, domestic, imported, and luxury cars with over 200 locations for its customers to test drive any vehicle prior to purchase.

Carmax also provides financing options with a seven-day money-back guarantee.

Carvana is the newest company to the used car industry, setting themselves apart with their unique multi-story car vending machines or home delivery.

Autotrader is a smaller online retailer for used vehicles but also provides other relevant information about vehicle purchases, such as insurance options, automotive comparison tools, reviews, and general advice.

Cars.com is different than its competitors described in this article because it serves as an online automotive classifieds company.

Cars.com does not have ownership of any of the vehicles it has listed for sale; the site serves to connect potential buyers and sellers on its platform.

With its myriad of options for its customers, Carmax continues to dominate its market with 14% of the used car industry.

Each of its competitors holds less than 8% of the sector.

Carmax’s in-person and online retail experience gives customers the ability to find a used vehicle that works for them, while also cashing in on offering financing options at the same time.

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Brent Davis has been writing about the financial markets for 10 years and worked in research for the last five years at a Fortune 500 company. Brent's investing strategy is to buy high-quality companies and then let compounding do its thing.