CarMax ROI Problem

Toyota RAV4
Toyota RAV4

Thesis

The total cost of ownership for buying a new Toyota RAV4 is lower than buying a 2-year old car from CarMax. The new car was $40,242, and the two-year car was $33,370.

The difference is the result of the older car being 2/3rds the initial purchase cost. The older car’s higher maintenance balances the higher interest of the newer car.

Method

Total cost of ownership included the following variables:

  • Initial car purchase price
  • Financing cost ($5,000 downpayment, 10% APR)
  • Estimated annual maintenance

Limitations

Purchase cost was pulled from Carmax and dealer websites. Annual maintenance estimated from personal experience.