Stay Away From CarMax Financing!

Carmax Auto Finance is a convenient way to finance your car right through CarMax and streamline the buying process. You should really consider bringing in your own financing and save thousands of dollars in interest.

What up everybody welcome back to my channel so in the last few uploads i walked you all through this red sport infiniti q60 that i purchased from carmax overall it was definitely a positive experience i have loved the car for the few months that i’ve had it so far and overall i would definitely recommend carmax to anyone looking for a car the only thing i would

Not recommend for anyone who is buying a car from carmax is to use their financing and i’m going to go over a couple of reasons why you don’t want to do that so when i finally decided that this q60 red sport was a car that i wanted to purchase i actually had to have the car shipped to a local car max location because the current lot that it was sitting on at the

Time was about 600 miles away from me so there was no way i was going to make that drive to go take a look at it so i had to ship to a local carmax location so i can do a test drive and take a look at it in person and while that was happening while the car actually was in transit i decided to go to the carmax pre-qualification process to see what the interest

Rates they would offer me would look like so if anyone haven’t hasn’t seen it before what it basically looks like is you put in some basic financial information and you’ll see about six different payment options uh varying in down payment amounts and term uh loan term length so you’ll see as short as three years and going up as high as six years so overall

The the common theme that i noticed with each of these offers was that they were on average around 10 interest which to me is extremely high i have a pretty good credit score and interest rates are really at all time low so i was expecting to see a lot better rates so after seeing these abysmal interest rates that carmax was offering me i decided to do my own

Research and look at one of my favorite sites which is reddit to see if anyone else was experiencing something similar so what i started to notice with that was that there were a lot of posts showing that carmax is probably uh notorious for uh giving people really high interest rates so i’m going to walk you through some of these posts that i’ve seen and show

You some of the outrageous interest rates that you can probably expect if you do decide to finance through carmax in this first post as you can see this person saying that their mom is paying about 30k for a car that originally was only 13 000 because of the absurd interest rate that carmax is charging them as you can see in the post they are being their mom

Is being charged 28 interest which is completely unbelievable that is a robbery right there that person will never be able to pay down this car or when they do paid on the car if if they pay down the car they will have paid almost triple its value which is insane so moving on to another post so another person who was also offered a 28 apr which is absurd so

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Don’t ever ever pay a 28 apr but moving along i came across a couple more realistic a little bit more realistic posts so 28 is not unrealistic but that’s really far-fetched um i think you probably have to have a really bad credit score to be paying that high but i ran across this person who has a 2016 ford focus and carmax offered them a 10 interest rate which

Is along the lines of what i’ve seen and this post was only from a year ago so it seems that carmax is still offering these really high interest rates and i’m just going to keep moving along to a few other posts that i found with just absurd rates so again another post from a year ago this person was looking to purchase a thousand dollar car and carmax offered

Them a ten percent interest rate again so as you can see this is a common theme for carmax and i’m gonna go over a couple of reasons why carmax is charging so much in interest when you’re financing through them so for those of you who don’t know carmax is a publicly traded company so you can go ahead and purchase shares in stock in carmax if you are interested

Just fire up your favorite brokerage account like robinhood and go in there and purchase uh shares if you’re interested but that’s not the point of this video the point is since carmax is a publicly traded company they have to disclose their financial information so what some companies do they put up these investor relation pages where you can kind of broadly

Over in an overview type fashion see their financial information from either quarter or from years so this is exactly what i have opened up right here i have carmax’s fourth quarter and fiscal year 2021 results so there’s a lot of good information on here but the part that i am particularly interested in is about the carmax auto finance department so the bullet

Point that i have highlighted right here so as you can see their auto finance department increased revenue by 68 percent due to the combined effects of favorable loan loss performance and higher net interest margin so that line right there is very interesting if you think back to a lot of the reddit posts that i showed you with the high interest rates that

Carmax auto finance department is offering people well there’s a reason why they’re offering those high interest rates because they’re making money a number of ways on a car purchase so they’re making money from actually selling you the car minus the price they actually paid for it if you have a trade-in they’re hopefully going to sell that car for more money

Than they give to you for the trading and their finance department they’re going to make a lot of money by giving you a loan hopefully at a very high interest rate and then as you see in some of the examples i showed you they’ll probably make double what they sold due to the car for on interest and as you can see uh the income for their finance apartment

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Increased by almost 70 percent so you can see why it’s in their incentive to charge you these really high interest rates and it’s it’s nuts in 2020 the average cost of a used car was around 20 000 and the price of a brand new car was around 37 000. uh that number kind of ballooned up a little bit in 2021 because of several reasons like the chip shortage and just

The inavailability of getting a new car so there was a recent article on kelly blue book that said the used car uh price has exceeded or the average used car price has exceeded 25 000 so that’s the number we’re going to use so i’m going to take us over to google’s car loan calculator so we can start doing some math and see why it’s really important that you use

Your own financing and how that affects your monthly payments and your total cost of the car so i have on the google’s car loan calculator opened up right here so for loan amount i have it filled in with 25 000 and i have an interest rate filled in at 10 which is probably what you can expect uh with average credit uh from carmax that’ll be the offer they’ll

Give you uh 60 month long period which is around five years so let’s take a look at the the output so as you can see the total cost of the car is thirty one thousand eight hundred and seventy one monthly payments are five thirty one so paying about six thousand eight hundred and seventy one in interest so about seven thousand dollars in interest and your car

Payment is 531. so let’s adjust this let’s say you got your own your own financing and you came in at 2.4 percent so as you can see your total cost of the car you’re only paying five hundred uh five now so you’re only paying about one thousand five hundred dollars in interest and your monthly payment is now 443 so a significant drop in monthly payments so as

You can see it’s really it’s really crucial that you definitely bring in your own um financing to bring down your total cost of the car loan and also bring down your monthly payments so let’s put in 10 again in here just so you can see for comparison 531 is your monthly payment and that comes down to 443 so almost 100 in savings definitely something you want

To take advantage of and for this final example let’s say you’re going to buy a used car i mean a brand new car 45 000 10 interest from carmax all right and let’s take a look at some of these numbers so total cost of the car 57 367 so as you can see you’re paying about twelve thousand dollars in interest on this car loan and your monthly payment is 956 which is

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Almost a thousand dollars and let’s say you brought your own interest rate your own interests your own financing you got a really good interest rate at 2.4 percent as you can see monthly payment went from 940 to 797 and the total cost of the car is now 47.799 so before you were paying almost 12 000 in interest on this car and now you’re only paying 2 799 so

Almost uh triple well definitely more than triple um interest on the other on the other loan so what i recommend for anyone who is looking to purchase a car from carmax take a look at the financing offers that they offer you take a look at the interest rate see if you’re one of the lucky ones that happens to get a low interest rate but if you don’t definitely

Want to look into your own financing take a look at big banks like bank of america capital one auto navigator all of those um banks integrate well with carmax you can do a pre-qualification on their website get a printout with uh interest rate offer that offer is usually good for 30 days maybe even 60 days take that letter over to carmax when you sit down with

Your sales rep they can take your reference number from that letter put into their system and it integrates nicely and an added bonus usually is once they start to actually process your car loan um you might actually see interest rate come down a little bit so what i mean by that is if your pre-qualification letter said you qualify for a three percent interest

Rate and you happen to uh go to carmax start the process you you might actually see that the three percent interest rate offer actually drops down to like 2.6 which is a nice surprise and the final option is uh user credit union credit unions sometimes tend to offer uh slightly lower rates than big banks so if you have a credit union you can apply for a call

On there there’s a little bit more of a process with some of these credit unions um not all of them integrate as neatly with carmax and systems since some credit unions are very small so there might be some back and forth between you between carmax getting all these documents sorted so a little bit of uh extra steps there but might be worth it for some slightly

Lower percentage points off of your interest rate and that’s overall my recommendation so if anyone has any experience with uh carmax and financing leave a comment and also if anyone has any suggestions to save people some money and avoid being ripped off or just paying a lot of money then unnecessarily leave a comment and thank you all for watching and talk to you all later bye

Transcribed from video
Stay Away From CarMax Financing! By Robbins Season