AutoStar’s Huge, Untapped, Growth Opportunity – as Confirmed by CarMax

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CarMax’s Performance in 2010

Thanks for all the positive messages about my blog last week.  It seems that many of you were quite surprised by the history of CarMax, the way that company got started in 1993 and its deliberate and slow growth.  If you would like to see and substantiate their history, use the following link: http://www.carmax.com/enus/company-info/about-us-timeline.html

Having just finished reading the CarMax 2010 annual report to stockholders, I wanted to make a few further comments on their performance in 2010.  The company does not mention in their report how many vehicles they sold in 2010, but their total sales and revenue for the year was up 7% over 2009, while the company’s net income rose a whopping 376% to a record level of $281,700,000.  The company added three stores in 2010, bringing their current number of locations to a total of 103 nationwide.  That means that the average net profit per store was $2,728,000.

AutoStar Can Beat CarMax Pricing and Also Deliver a Unique Brand

Carmax sold 349,000 cars in 2009 which was an average of 291 cars per store each month.  Dealers who really keep up with the used car market know that a dealership can beat their pricing on every deal any day of the week.  It’s just a matter of getting those  customers to shop at your dealership.  That is why dealers need a nationally recognized brand.  AutoStar is the answer.  Not only can we compete with CarMax, but we can beat their pricing and deliver a unique brand in the marketplace in that the EverStar vehicle comes with the industry’s only lifetime engine guarantee and lifetime safety components.  It is the EverStar program that drives customers back into our dealerships every three months or 3,000 miles because they must maintain that car at the AutoStar dealership to maintain program eligibility.

Give CarMax a lot of credit–I certainly do.  They realized early on that three times as many used cars are sold each year as new ones.  They also realized that the consumer’s view of the experience of buying a car compares to getting a root canal at the dentist’s office.  It was an experience the customers just didn’t like.  The CarMax message is simple: All of their vehicles are guaranteed, there is no haggle pricing and CarMax will buy your trade in even if you don’t buy from them.  We at AutoStar can do all that and more because we offer a lifetime engine guarantee and safety features.  AutoStar wants to service our customers’ cars after the sale, CarMax does not.  Just think of what a healthy service and parts business would do to their bottom line average of $2,728,000 per store!

AutoStar’s Huge Untapped Growth Opportunity

One of the closing statements in the letter to shareholders in the CarMax annual report for 2010 states “We remain confident in the long-term opportunities we provide for associates, customers and shareholders.  We continue to be fortunate to have no similar-format, multi-market competitors, and we believe this concept development advantage, together with our culture of continuous innovation and process improvement, provide us a defensible competitive advantage.  At the same time, while we are by far the largest used car retailer in the U.S., our share of the overall late-model used vehicle market is less than 3% and we are only in markets that represent about 45% of the U.S. population, reflecting our huge, untapped growth opportunity.”

I couldn’t agree more with the observation that there is a huge untapped growth opportunity in the used car market.  We at AutoStar are the competitor that CarMax does not see yet but will definitely be aware of by the end of 2011.  You, as an auto dealer have a tremendous opportunity to get in on the ground floor of AutoStar as it becomes real competition for them.  Please email me or call me, Ken Zangara, at AutoStar today at 877-265-5123.