CarMax 2007 Annual Report Download - page 5

We founded CarMax on the belief that an opportunity
existed to address the unmet consumer need for integrity and
transparency in automotive retailing. Surveys indicated that
few consumers trusted the high-pressure sales tactics of tra-
ditional auto retailers, especially for used vehicles. From the
start, we committed ourselves to the principle of integrity,
and our brand name has become synonymous with an offer
consumers know they can trust.
CarMax is more like a “big-box” retailer than a traditional
auto dealership. We offer pre-determined, no-haggle pricing
on all elements of the transaction; open, transparent, and
friendly customer service; and a huge selection of vehicles,
each reconditioned to our high-quality standards. Similar to
big-box retailers, our business is volume-driven. We enhance
our profitability by selling a high volume of cars per store and
leveraging our fixed expenses.
Integrity guides each step of our process. One sales con-
sultant handles all facets of the customer’s car-buying experi-
ence from start to finish. We compensate sales consultants on
a fixed dollar-per-vehicle standard that is not based on the price
or the gross profit of the vehicle. This aligns associate and
customer interests, and removes the incentive to sell cus-
tomers a vehicle they don’t need. Our purchase of vehicles from
our customers is not dependent on their buying a vehicle from
CarMax; we’ll buy their car every time, whether or not they buy
from us. Our buyers will independently appraise the customer’s
vehicle and make an offer based solely on the vehicle’s esti-
mated wholesale value and current market conditions.
Customers also trust in the quality of the vehicles we sell.
We are committed to stringent standards and do not retail
cars with flood or structural damage. For all our used retail
vehicles, our thorough inspection and expert reconditioning
result in a superior product.
We also offer straightforward financing. The sales associate
collects the customer’s credit information and electronically
submits a credit application to CarMax Auto Finance and a
third-party finance company. Applications are automatically
rerouted to additional third-party finance companies, if neces-
sary. Financing offers are competitive and based on the
lender’s assessment of credit risk. The customer sees
each finance offer as it is made directly from the lender,
and, where multiple offers exist, they may choose the one
that best meets their needs. The CarMax associate receives
no commission on the finance process, which eliminates
any incentive to steer customers toward one financing
option over another.
Even those vehicles acquired through our appraisal
process that don’t meet our retail standards are sold at
our wholesale auctions with their own measure of CarMax
integrity. We disclose all known major defects and we
provide outstanding customer service in the form of an
exceptionally high 97% sales rate, access to an on-site
third-party financing provider, a dealer perks program, and
vehicle transportation assistance.
Integrity is fundamental to our company culture. Being
known for integrity in our business practices and corporate
culture helps us recruit and retain superior associates. Our
culture of integrity has resulted in the creation of a diverse
workforce that focuses on treating every associate and cus-
tomer with respect.
CARMAX 2007
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CarMax sales consultants
handle all facets of our
customers’ car-buying
experience including finding
the vehicles that best meet
their needs and the test drive.
Sales associate compensation
is based on a fixed dollar-
per-unit standard, which
aligns their interests with
those of the customer.