CarMax Inc. is opening a retail outlet that will buy used vehicles but not sell them.
The public dealership group is scheduled to open its CarMax Buying Center on Friday, April 28, in Atlanta. Its employees will appraise and buy vehicles from consumers.
CarMax CEO Austin Ligon calls the test store part of a long-term company plan to increase appraisal traffic. He says he thinks it will give CarMax access to desirable trade-ins that are hard to come by at auction.
"We suspect pretty strongly that it will work," Ligon told industry analysts during a conference call last month. "Even though off-lease and off-rental cars are out there, and they give you pricing opportunities, you will never get a Honda Odyssey minivan with low miles out of a lease or rental fleet. You buy those from customers."
Ligon declined to estimate the new center's likely business volume. He says the pilot project will succeed if it buys enough vehicles and generates enough profits to pay for itself.
The center is a renovated service station on 1.5 acres. It is in a thriving vehicle-trade area but too close to another Atlanta CarMax store to sell cars and trucks, Ligon says.
The center plans to gather customers' home ZIP codes and ask them where they have shopped for vehicles.
CarMax will use the data, Ligon says, to determine whether the center is initiating appraisal business or taking it from the nearby store.
The company also plans to monitor how many vehicles the center buys, the mix of vehicles it attracts and whether the center is the right size, he says.
During its March conference call, CarMax also reported financial results for its fourth quarter and 2006 fiscal year. Both ended Feb. 28.
Quarterly sales rise
For the quarter, CarMax sales increased 16 percent from the year-ago quarter to $1.62 billion. Net quarterly earnings rose 36 percent to $40.4 million.
Sales for the fiscal year totaled $6.26 billion, up 19 percent from fiscal 2005. Net earnings for the fiscal year increased 31 percent to $148.1 million.
In its fourth quarter, CarMax sold 73,449 used vehicles and 4,302 new vehicles. Those sales compare with 69,511 used and 4,271 new vehicles in the year-ago quarter.
In fiscal 2006, the company sold 289,888 used vehicles and 20,901 new vehicles. Those sales compare with 253,168 used and 20,636 new vehicles in the previous fiscal year.
CarMax operates 67 used-car stores and seven new-car franchises in 31 U.S. markets.
You may e-mail Arlena Sawyers at [email protected]