Updated August 3, 2020
Today’s dealers need a confident auction sourcing strategy to succeed. Why? Because achieving a higher gross and turn for your dealership starts with buying the right cars at the right price.
Dealers should walk into each auction knowing what to expect — and how to leave with the best deals.
That means getting to know big names like CarMax. With 75 auction sites around the country, CarMax has won over dealers with the same friendly, transparent service that made them the largest used car retailer in the US.
CarMax Dealer Auctions are currently the third-largest used car auction in the US, and they run a little different than the other big auctions. In this article, we’ll highlight some of the key differences and give you tips on how to make the most out of every CarMax auction.
CarMax Dealer Auctions vs. Other Auctions
CarMax Dealer Auctions have a reputation for selling high-quality vehicles with a friendly, professional staff. Amazingly, they sell 97-100% of all vehicles the first time, which is a testament to the caliber of vehicle you will find there. Each vehicle comes with an AutoCheck report, so you can be confident in your purchases.
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One key difference between CarMax auctions and other auctions is that CarMax owns all the vehicles they auction off. This is good for a few reasons: First, there are no “ifs” or “calls” during the bidding process; each sale is open and straightforward. Second, you can have more confidence trusting that since CarMax was willing to buy the vehicle, it probably won’t be a lemon. For even more assurance, CarMax offers an arbitration process if there is a major issue with the vehicle that wasn’t discovered prior to auction.
Carmax does have one minor drawback compared to other auctions: They don’t accept credit or debit cards. Come prepared with cash, check, or wire transfer.
It’s easy to see why CarMax dealer auctions are loved across the country. If you’re planning to go to your first CarMax auction, make sure you’re prepared by following the suggestions below.
How to Get the Most Out of CarMax Dealer Auctions
In many ways, CarMax auctions are just like any other live auction. In other ways, they differ greatly. Whether you’re new to CarMax auctions or a seasoned veteran, follow the suggestions below to get the most of your next auction:
1. Register Online Prior to the Auction
CarMax Auctions are open only to registered auto dealers. Registration is free, so go online before the day of the sale to register your dealership. Everyone who attends the auction with you must also be registered with your dealership.
You can also register the day of the auction, but you’ll have an advantage by registering beforehand. The CarMax members program has a lot of great perks for dealers, like travel discounts, auction updates, and run lists.
2. Know Your Inventory Needs
Before attending any auction, it’s critical to know what you need on your lot. This all starts with knowing your best sellers, your fastest sellers, and the vehicles on which you make the highest profits.
Some car appraisal tools also come with built-in inventory data, making this task rather simple. Looking at your past sales trends, these tools can even tell you which type of vehicles you need to stock up on.
You should also look for a tool that lets you do competitor inventory analysis as well. Like any business, differentiation is key for dealerships, and you don’t want to try playing a game that your competitor down the street is already winning. Use tools like VINCUE to scope out which makes and models they sell the most and build a competitive sourcing strategy.
3. Research the Auction Online
Most auctions, including CarMax, will make the run list available online before the day of the auction. You need to be a registered CarMax member to do this, but it’s well worth it. By doing research online, you can sit with your favorite appraisal tool and do in-depth research on each vehicle before the big day.
Be aware that run lists aren’t 100% accurate until the day of the auction, but this is still a great way to get a jump on the competition.
4. Get to the Auction Lot Early
Nothing compares to getting on the lot and seeing the vehicles for yourself. CarMax opens their gates 2 hours before bidding begins, so get there early to double-check the vehicles you scoped out online.
While roaming the lot, inspect vehicles for obvious damage, cosmetic issues, and information listed on the car window that might be relevant. For example, CarMax will indicate on the window whether or not a vehicle has an absent title.
5. Appraise Vehicles Beforehand
Whether you’re doing research online or on the lot, car appraisal is a critical step before bidding on any vehicle. You need three key pieces of information:
- Retail Market Value. What is this vehicle worth at retail? The value will change depending on the year, mileage, condition, and demand.
- Reconditioning Costs. Reconditioning for some vehicles can cost a thousand dollars or more. Be sure to factor this in when deciding how much to bid.
- Desired Margin. How much money do you want to make on this vehicle?
Appraisal tools like VINCUE make appraisal easy. They even tell you how sellable a vehicle is in your market. If you’re already on the lot, use VINCUE’s VIN scanner to appraise vehicles on the fly.
6. Identify Your Price Ceiling
Based on what you find in your appraisal, you’ll want to set a “price ceiling” for each vehicle. In other words, how much are you willing to bid for this vehicle?
In the screenshot above, you’ll notice VINCUE helps you do this by giving you the Wholesale Appraised Value (in yellow).
It’s easy to get caught up in the excitement of a bidding war, especially if you really like a vehicle. But remember this very, very important message: Do NOT bid higher than your price ceiling.
Do NOT bid higher than your price ceiling
The price ceiling is there to protect you. It reminds you that you have reconditioning costs and margins to make. If you go into an auction willing to pay anything for a vehicle, you’re going to lose a lot of money. Find your price ceiling and stick to it, even if it’s painful.
7. Listen for Conditional Announcements
Before bidding, the CarMax staff will announce important information about each vehicle that might not have been in the run list. Announcements could include any major mechanical issues, such as a bad motor or transmission. It could also be about structural damage or known title brands.
Whatever the announcement, it’s safe to say you’ll want to hear it before bidding. Your reconditioning costs will be a lot higher if you have to replace the engine. Be sharp on the day of auction and listen for these messages.
8. Arrange Transportation for Your Vehicles
So you won a few vehicles at great prices. Congratulations! Now it’s time to get them home. Unfortunately, Carmax only offers transportation services at select locations. This means you’ll have to handle your own transportation back to the dealership.
CarMax requires you to take your vehicles by the end of auction day, so it’s important to have this transportation set up ahead of time, especially if you’re traveling some distance to get to the auction.
Bonus Tip: Navigating Online/Simulcast Auctions
A longstanding complaint about CarMax auctions has been their lack of an online/simulcast version. However, that’s changed recently in the wake of COVID-19. They now hold weekly virtual auctions through their simulcast partner Velocicast.
The good news: most of the information we’ve covered still applies to these online auctions. Since CarMax’s in-person and virtual auctions operate similarly, dealers should be able to quickly master this new format.
You’ll still need to register before each auction. Once, you’ve signed up, you’ll be able to preview the run list prior to the auction as usual.
During the auction, dealers can view information on available vehicles such as their features, bid history, and current bids. Payment options are the same as in-person auctions (no credit/debit cards) and CarMax does offer an option to ship your wholesale vehicles to you if you haven’t arranged other transportation.
The introduction of virtual auctions through CarMax is definitely exciting. Unfortunately, there’s still no official word on whether these auctions are only a temporary solution. Fans of the new digital format will have to wait and see if CarMax decides to start holding them permanently in the future.
Getting the Most Out of CarMax Auctions
CarMax auctions are great for stocking used vehicles and are also a lot of fun. The most important thing to remember is to do your homework before attending. Know your inventory needs, appraise the vehicles up for auction, and set your price ceilings before you get caught up in the excitement. If you do all of those things, you’re sure to enjoy the auction even more because you’ll be driving away with great buys.
Of course, CarMax isn’t the only place to source vehicles. Built-in auction sourcing through VINCUE allows dealers to find the most in-demand vehicles around the country and bid on them from a single dashboard. While it might not match the thrill of in-person auctions, VINCUE’s data-driven platform ensures your dealership acquires the right inventory at the right price.