CarMax – Too Risky for Wise Investors?

Thinking of investing in CarMax? You may want to take a close look at their breathtakingly risky practice of selling unsafe, recalled cars to consumers.

CarMax is already under fire from consumer groups,  faces potential action by the Federal Trade Commission, and has been repeatedly exposed in undercover investigations by TV news organizations, including ABC’s 20/20, over its sales of unsafe, recalled cars to consumers.

Here’s the rub:  CarMax advertises that all their cars must pass a “rigorous 125+ point inspection” before they can be sold as “CarMax Quality Certified” cars.  But how can a car with a killer defect possibly pass a rigorous inspection and meet their standards?

Despite the mounting scrutiny, CarMax recklessly persists in selling “CarMax Quality Certified” unsafe, recalled cars at retail to consumers. Case in point:  Even when competitors like AutoNation have wisely announced their decision to cease selling used cars with unrepaired Takata air bags, CarMax continues to sell them anyway.

Defying common sense and responsible business practices, CarMax somehow seems unable to bring itself to stop selling consumers cars with the notoriously defective air bags, which can explode on impact, hurling shrapnel at the driver and front-seat passenger’s face and neck..  In cases that are making global headlines, the defective air bags have caused  serious injuries, including blindness, while other hapless victims have bled to death.

This particular defect  remains the focus of Congressional investigations in the U.S. Senate and House of Representatives. Takata also faces possible legal action by the National Highway Traffic Safety Administration, and by the US Department of Justice.

So — what does AutoNation know and take into account that CarMax doesn’t seem to grasp?

Is CarMax waiting for a total PR catastrophe, before they stop making that added bit of profit by selling lots of unsafe, defective, recalled cars to consumers, instead of having them repaired or selling them for a somewhat lower price, at wholesale?

Whatever CarMax’s motivation, wise investors may wish to rethink the company’s self-inflicted level of exposure.


ABC 20/20 exposes CarMax’s sales of damaged cars and unsafe, recalled cars

CarMax Admits It Sells Unsafe, Recalled Cars
So — how can a car that’s so unsafe pass their so-called  “rigorous 125+ point inspection”? No one seems to know…and CarMax refuses to go on camera…


” CarMax says it has transformed the used car buying experience with no haggling pricing and financing and its “125+ point” inspection process to make sure drivers don’t end up with a lemon. But consumer advocates say CarMax sales reps don’t always disclose the complete history and condition of the vehicles they sell.

A 20/20 investigation found instances on two CarMax lots where vehicles were being sold with reportedly significant accident histories or unrepaired safety recall issues….

When it came to outstanding safety recalls, the Hartford dealership salesman was recorded on hidden camera telling Benitez that CarMax is unable to sell a car with a major safety recall. “We can’t even sell it until that’s taken care of,” he said. “We take care of any kind of safety concern prior to the car even being out here.”

However, a check of a federal government website revealed that the Toyota Camry at the Hartford CarMax dealership had three outstanding safety recalls on it at the time of our visit, including one for a power switch that could overheat and melt, possibly resulting in a fire. Five other vehicles sitting on the lot also had unfixed safety recalls, according to the government website.

CarMax declined an interview but told 20/20 in a statement that it doesn’t automatically fix recall vehicles before selling them and only does so if a customer requests it. CarMax says it does inform consumers about any open recalls and recently upgraded its website so customers can look up open recalls online through the government database. CarMax also says it retrained its staff on its recall policy.

A coalition of consumer and safety groups filed a petition with the Federal Trade Commission this June, urging the agency to investigate CarMax’s safety recall policy. Rosemary Shahan, head of Consumers for Auto Reliability and Safety (CARS), is calling on the FTC to require CarMax to have all safety recall vehicles repaired before selling them to consumers. “CarMax sells vehicles that are under safety recall without bothering to fix them,” said Shahan. “If they wanted to do it right, it would be very easy for them to do it right.” (Emphasis added)

Read more: ABC 20/20:  What Do Some CarMax Sales Reps Tell  Consumers?

“Regional” auto safety recalls place military families at risk

The refusal by Takata and some manufacturers to expand the safety recall of defective, exploding air bags to cover the entire nation is jeopardizing the safety of many of America’s military families.

If you are a member of the Armed Forces, under Federal law, you are allowed to register your car in your official state of residence. Regardless where you are stationed, or the state where you and your family members are actually driving your car.

Auto manufacturers use data from RL Polk to identify owners of recalled vehicles and send them notices. But that data is based on where their vehicles are registered.

So if you are serving  in the military, and register your car in New York, but are stationed in a high-humidity state like Florida, you may not receive the safety recall notice for your car.  Even though  Honda, Toyota, and other manufacturers, as well as the air bag supplier Takata, now acknowledge the air bags should be recalled in high-humidity states like Florida.

That’s because, as far as RL Polk and the manufacturer are concerned, cars that are registered in New York are being driven in New York. They fail to account for the fact that if you’re serving in the military, you may have registered your car in New York, but be stationed for years in a high-humidity state like Florida.

Florida is home to at least 29 Navy, Marine, Air Force, and Coast Guard bases, with over 50,000 active duty personnel.  No doubt many of them have chosen to register their cars in their official state of residence, where the taxes may be lower, or it is simply more convenient.

What are Takata and auto manufacturers who installed the potentially deadly air bags in their cars doing to protect military families?  It appears that the answer is nothing.

We hope that Members of Congress and the National Highway Traffic Safety Administration will pressure the manufacturers to ensure that members of the Armed Forces and their families are alerted to the hazards, and their cars are repaired, regardless where they are stationed, or where their cars are registered.

Better yet, all auto manufacturers and Takata should make the safety recall national, so all owners and their families can have the safety recall repairs performed, without having to pay out of pocket for the mistakes made by Takata and the manufacturers — and without being injured or killed by flying shrapnel from the defective air bags.

One more reason NOT to buy a car from a car dealer

Even the auto dealers themselves have to admit:  many car buyers dread buying cars from auto dealers. Young people are especially wary.  And for good reason.

Car dealers keep selling unsafe, recalled used cars to consumers, putting them, their friends and family, and other motorists at risk of death or serious, debilitating injuries.

And as if that weren’t bad enough, they also insist that you surrender your Constitutional rights as part of the price of buying a car from them.

Good luck trying to buy a car from a dealer without a “gotcha” clause hidden in the contract that says you give up your Constitutional right to take them to court, and benefit from  our nation’s hard-won consumer protection laws. Like laws against rolling back odometers, selling “junk” cars that are advertised as being “in mint condition,” or engaging in other forms of cheating, lying, fraud, and thievery.

And get this:  the dealers got a special exemption from Congress — just for car dealers —  that allows them to keep THEIR Constitutional rights. So they can take anyone they want to court, and use the laws that benefit THEM. But they killed a bill that would have protected YOU from losing your rights when you sign on the dotted line to buy a car from them.

If you’re fed up with car dealers and their scams, check this out:

Cleveland Plain Dealer: Arbitration: What you don’t know about fine print can hurt you

And let your local car dealers know you’re not buying from them until they clean up their act, and you don’t have to surrender your rights to buy a car from them.