Sonic Automotive Will Challenge CarMax With Used Car Franchises

CarMax has used some effective marketing to position itself as a "cut above" your traditional used car lot. The jury is still out on whether or not CarMax gives you the best value, but their business model is very successful. Now Sonic Automotive wants part of the action.

Sonic Automotive is one of the largest new-car dealership companies, but with new car profit margins becoming slimmer, dealerships are finding used cars are where the money is. According to a report in the Wall Street Journal, Sonic plans to open a chain of used car franchises that follows the CarMax model.

"It's too big a market and there is too much of an opportunity," said Sonic's executive vice president of operations, Jeff Dyke. CarMax sits "in their own world without any competition really," he said. "We think there is plenty of room for us."

Sonic will begin its offensive into the used car realm with their EchoPark stores. The first one will open in the Denver area, situated not far from a Car Max location. Like CarMax, Sonic pre-owned lots will have a "no haggle" policy because prices will be set by a central office and a customer will stay with the same salesperson from beginning to end. The dealership group plans on transitioning this new model to their other stores.

Sonic's overhaul of the sales process also will extend to new-car sales. The company aims to eliminate the so-called pain points of buying a car and make the process simpler and faster, starting with getting buyers out the door in under 45 minutes. It currently takes the average buyer 2.38 hours to purchase a car, according to AutoTrader.com. Transactions also will be handled with electronic tablets, cutting paperwork.

Sonic sees CarMax as the "Wall Mart" of the used car marketplace. Within this fiscal year, CarMax had a revenue growth of 15% totaling $12.8 million. Sonic eventually plans on having its own financing arm, but as of now there is no word as to whether or not Sonic will offer those famous warranties that CarMax is known for.

(Photo Credit: Getty Images)

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