CarMax ROI Problem

Honda CRX
Honda CRX

Thesis:

The total cost of ownership for buying a new Honda CRV - EX is lower than buying a 2-year old car from CarMax. The new car was $31,998, and the six-year car was $15,998.

The differences stem from the initial price of the car. A car of the same model that is 6 years older with over 100,000 more miles is roughly half the price of the new Honda CR-V with only 7000 miles.

The old car costs about 16% more than the initial cost factoring in down payments, whereas the new car costs about 21% more than its initial cost when it’s all said and done.

Method

Total cost of ownership included the following variables:

  • Initial car purchase price
  • Financing cost ($15,998 downpayment, 8% APR)
  • Estimated annual maintenance

Limitations

Down payments were both set to half of the asking price at 8% APR for 72 months. Purchase cost was pulled from Carmax and dealer websites. Annual maintenance estimated from personal experience.