Carmax Competitors Analysis : How Does It Stand Out?

CarMax Inc. is an American chain of car retailers which specializes in selling used cars. Headquartered in Richmond, Virginia, CarMax was founded in 1993 and is publicly traded as NYSE: KMX on the New York Stock Exchange. The company is widely known for its extensive inventory of used cars, including vehicles from several brands, decades, and price ranges.

There are two business segments in CarMax. The first segment is Retail, which includes wholesale auctions and retail used car sales. It also includes all of the company’s US stores that sell used cars and the e-commerce business. The second segment is auto finance, which includes the company’s in-house and third-party finance sources.

The company currently boasts over 220 locations in the US, with over 750,000 cars sold in FY 2021. It had revenues totaling $18.95 billion in the same year, a 6.74% increase from 2020 with a $2.37 billion net income. Its current total assets are valued at $21.542 billion, and it’s regarded as the best retailer of used cars in the US with a 28.05 percent market share.

CarMax Business Strategy

In a world of increasing competition, CarMax manages to stay on top of the game through its efficient and creative business strategy. The company is committed to making used car buying easy for its customers. Its strategy is based on a no-haggle and transparent pricing to provide a customer-oriented experience. With its customer-friendly prices, CarMax can attract more customers from all parts of the US and other countries.

To drive revenue growth, the company has initiated a move to support the most customer-centric model possible. Given the rise in e-commerce, CarMax focuses on its Omni-channel business strategy to stay relevant in the ever-changing market.

E-commerce has become important to CarMax to drive sales and provide a great customer experience across the board. Its website serves as an e-commerce platform and provides its 27 million monthly visitors with information on car buying steps plus other related topics such as financing, insurance, etc. In addition, CarMax also uses its website to increase revenue by selling extended warranties and service contracts.

In the 2021 analyst day event release, CarMax introduced new long-term targets: to increase its revenue by 75 percent by fiscal 2026. The company expects to sell about 2 million cars each year for the next five years through its CarMax stores and online platform, representing a CAGR of about 10 percent from 2021. The company also plans to increase its national used car market share by about 5 percent each year until 2026.

CarMax SWOT Analysis


  • Strong distribution network: With 220 stores, CarMax has a strong presence in the US, resulting in its extensive dealer network for its customers. This translates to the company having a wider reach and excellent marketing power.
    Aggressive price strategy: As previously mentioned, CarMax is known for its competitive prices, an attractive offer in the current market where shoppers are looking for value for their money.
  • Flexible inventory: CarMax’s no-haggle pricing strategy allows the company to carry a large inventory of cars at all times to suit any customer need. With car brands, decades, and price ranges to choose from, it’s guaranteed that customers will find the car of their dreams at CarMax.
  • Customer-centric strategy: What makes CarMax different is its customer-centric approach in all aspects of how it operates. This includes its positioning and marketing strategies as well as its business model. As a result, CarMax has been able to gain the trust of its customers.
  • Strong financials: Over the years, CarMax has been able to post great financial results. It’s a publicly traded company with a market cap of about $20.401 billion as of August 31st, 2021. Its revenue and net income have kept growing despite economic downturns. During the 2021 fiscal year, CarMax posted a 28.8 percent revenue growth from the previous year.


  • Large store size: Despite its efforts to try and reduce the size of its stores, CarMax still has large stores with an average area of about 59,000 sq. ft. This makes it difficult for the company to open more stores in crowded areas.
  • High opportunity cost: CarMax’s no-haggle pricing strategy comes with a high opportunity cost. Since the company has to buy back used cars from customers who want their initial investment back, there is an additional cost that affects its profit margin negatively.


  • Expanding in overseas markets: With the ever-increasing demand for cars in the third world and developing countries, CarMax can leverage its strong brand presence and adapt its product offering to suit customers’ needs in these countries. In addition, establishing a solid foothold in those markets will allow CarMax to take advantage of future growth opportunities.
  • Growth in e-commerce: The online market has seen considerable growth over the years, and it’s still growing as more people turn to the internet for their purchases. As such, CarMax can increase its market share and drive more revenue through its website by offering quality cars at competitive prices. It can also boost customer satisfaction since customers won’t have to go out of their way to buy a car in one of its physical stores.


  • Increasing competition: CarMax isn’t the only car retailer in the business. As such, it has to compete with other companies for customers, which can threaten its growth. To avoid this, CarMax has to adjust its pricing strategy and marketing efforts while focusing on offering value-for-money cars.
  • Economic downturns: The next five years will be interesting as several countries have gone through economic downturns that affected their car industries heavily. Some car brands are fighting for survival, which is likely to impact the demand for used cars.

CarMax Competitor Analysis

CarMax faces competition from many companies, including independent used car dealerships, new car dealerships, and other traditional used car retailers. While the company has a strong customer base and loyal customers, increasing competition from companies such as Copart, Penske, Cargurus, AutoNation, and Carvana will affect the company’s growth.

1. Penske Automotive Group


Penske Automotive Group, Inc., [NYSE: PAG], and its subsidiaries engage in the retail automotive merchandising business primarily in the United States and Western Europe. It has its headquarters in Bloomfield Hills, Michigan, and was founded in 1986.

The company also provides automotive maintenance and repair services alongside financial and insurance services to automotive retail customers. This is through company-operated service centers and finance or leasing departments, including car buyers who turn to Penske-owned dealerships for service, as well as independent dealerships and other automobile retailers.
It competes with CarMax by offering customers a wide range of services, including brand-specific reconditioning and roadside assistance. With its strong presence in the market, it has the potential to undercut CarMax’s prices and ultimately affect its bottom line.

In FY 2020, it recorded revenues amounting to $20.4 billion from its 304 automotive franchises, industrial equipment, and truck dealerships, as well as its commercial vehicle auctions. The company retailed and wholesaled more than 505,000 new and pre-owned vehicles in FY 2020. As of August 31st, 2021, its market cap stood at $7.22 billion.

2. AutoNation Inc.


AutoNation Inc. [NYSE: AN] is an American automobile retailer headquartered in Fort Lauderdale, Florida. The company operates as a chain of new and used car dealerships in the US. It specializes in selling vehicles from various car brands all over the world. Founded in 1996, AutoNation has expanded to become one of the largest automotive retailers in the US.

Currently, it has well over 300 stores distributed all over the country, with its revenue for the second quarter of FY 2021 amounting to $7.0 billion, an increase of 54 percent Y/Y. It recorded a net income of $385 million, resulting in an EPS of $4.83 per share. As of August 31st, 2021, it had a market cap of $7.97 billion.

While AutoNation might not pose a direct threat to CarMax’s business, it is a significant player within the automobile industry in the US and has several advantages over smaller competitors. It has more stores around the country and offers financing and insurance services that can pose as alternatives to CarMax.

3. Copart


Copart, Inc. [NASDAQ: CPRT] operates as a self-administered and self-managed salvage auto auction company worldwide. It has its headquarters in Dallas, Texas, and is available in 11 countries with over 200 physical locations. Founded in 1982, Copart sells vehicles at retail and public auctions to wholesale customers such as insurance companies, used car dealerships, and government agencies.

Copart is a major player in the global salvage and used car market with a revenue of $2.2 billion, an operating income of $816.09 million, and a net income of $699.9 million as of July 31st, 2020. As of August 31st, 2021, it had a market cap of $34.13 billion.

Copart poses a threat to CarMax’s business with its ability to provide retail sales and public auctions where the company can both sell and buy vehicles. In addition to this, it also offers insurance companies a wide variety of options when it comes to salvaged vehicles.

However, Copart’s average revenue per unit is significantly lower than CarMax’s since its business model is solely based on auctioning salvaged vehicles which generally results in lower prices.

4. Carvana


Carvana Co. [NYSE: CVNA] is a leading online retailer that specializes in selling used cars directly to consumers over the internet. It was founded in 2012 after receiving funds from various investors through its Private Equity Firm, DriveTime. It went public in 2017, raising about $215 million from unknown investors alongside its $1.6 billion when it was a private company. Headquartered in Tempe, Arizona, Carvana operates as a chain of e-commerce used car dealerships with over 24 car vending locations across the country.

On August 31st, 2021, Carvana had a market cap of $27.76 billion. It recorded revenues amounting to $5.587 billion and a total gross profit of $793.8 million as of December 31st, 2020. During the same year, it sold 244,111 vehicles, indicating an increase of 37 percent Y/Y.

With its strong online presence, Carvana poses a direct threat to CarMax’s business with its expansion in the US and its ability to attract younger customers who prefer online shopping. This is further strengthened by the company’s vending machines, where vehicles are delivered directly to the customer at little to no additional cost.

5. Sonic Automotive


Sonic Automotive, Inc. [NYSE: SAH] is a publicly-traded company based in Charlotte, North Carolina. It runs one of the largest automotive retailers in the US with over 100 locations. In 2016, it was ranked as the fifth-best automotive retail dealership based in the US, with 290,275 total units sold.

With a strong market presence in the US, Sonic Automotive has a diversified business model that includes new and used car sales, aftermarket parts and service facilities, collision repair shops, and financing. It is also considered to be one of the top-performing public companies within its industry.

In the second quarter of 2021, Sonic Automotive recorded a revenue of $3.4 billion, an operating income of $151.0 million, and employed over 10,000 people. On August 31st, 2021, it had a market cap of $2.11 billion. Its 2020 operating revenue was $9.767 billion, with a gross profit of 1.42 billion.

How CarMax Stands Out Against its Competitors

As a direct dealer of used cars, CarMax’s primary business is to provide low prices and superior customer service while selling directly. It differentiates itself from other competitors by using trained staff that assesses vehicles before putting them up for sale.

The company also provides cheap loans, discounts, extended warranties and allows customers to trade in their used cars. These services enable CarMax to attract customers and help them acquire additional vehicles after selling one of their vehicles. In some cases, the company will buy a customer’s old car and provide another one for a cheap loan.

The company leverages its network effect such that as the number of retail stores increases, so does its inventory and, therefore, its attractiveness to customers. This results in increased revenues and a more diversified portfolio for the company.

Another competitive advantage of CarMax is its inherent business strategy of buying and selling used cars. Unlike other dealerships, the company buys cars directly from individual sellers and then resells them at a much lower price than franchised dealerships. The strategy forces customers looking for cheaper options away from franchised dealerships towards CarMax as it offers a broader selection of used vehicles, including luxury cars.

CarMax Competitor Analysis (FAQs)

Question: Who is CarMax’s biggest competitor?

Answer: Among its largest competitors, CarMax has Sonic Automotive, a publicly-traded company that operates in 100 locations across the US. Its other competitor is Carvana, an online used car retailer with 24 vending machine locations and 244,000 vehicles sold in 2020. It also competes with AutoNation Inc., Group 1 Automotive Inc., and Penske Automotive Group.

Question: What is CarMax’s competitive advantage?

Answer: One of the major strengths of CarMax is its ability to provide a wide range of used cars at low prices, especially for customers who are looking for high-end vehicles such as luxury cars. Its excellence in customer service ranks it among the top competitors in its industry.

Question: Does CarMax pay more than dealers?

Answer: CarMax offers extra incentives, low-interest rates, and warranties, making it more attractive to customers than franchised dealerships with fixed prices. This allows CarMax to attract customers looking for cheaper options while also helping them acquire additional vehicles after selling one of their cars.


In sum, the car industry is a highly competitive market where companies battle for customers. CarMax’s competitive advantage is its business strategy and customer service, which enables it to attract many customers, especially those who prefer shopping at physical locations.

Also, the company’s use of trained staff and appraisal services enable it to offer flexible terms and prices for its customers. In turn, this gives CarMax the ability to minimize costs and maximize margins, resulting in a more diversified business portfolio.

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