CarMax Auto Loans Review

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Point of Interest

CarMax auto finance partners with multiple lenders to cater to customers with different credit profiles, meaning you may be approved even if your credit isn’t perfect.

Intro

There’s a lot to love about CarMax auto finance. For starters, it allows you to get pre-approved so you can shop for your next used vehicle with a clear budget of how much you can spend. You can also change your financing arrangements without penalty should you find a better deal elsewhere within three days. In line with the CarMax brand, it’s all about transparency and convenience.

What you will need to keep in mind, though, is that CarMax finance is only available for CarMax certified vehicles. Luckily, CarMax boasts an inventory of 50,000 vehicles, so finding one to suit your taste and budget should be relatively easy.

What to know about CarMax Auto Finance Loans

One of the most interesting things to note about CarMax auto finance is that it partners with a range of lenders to accommodate most credit profiles. CarMax finance works with lenders that include Ally Auto, American Credit Acceptance, Capital One, Exeter, Santander, Wells Fargo and Westlake Financial Services.

Loan terms are flexible and range from 36 to 72 months. Unlike some dealerships, CarMax does not require a downpayment, which means you’ll likely be in a car sooner because you won’t need to save a deposit. However, the downside is that it could reduce your loan approval chances or lower your loan approval amount if you aren’t planning to put money down on a vehicle. Not having a downpayment could also increase your interest rate and monthly repayments.

It’s worth noting that if you don’t have cash on hand, you can trade in your current vehicle and use the proceeds as your downpayment — provided that you don’t owe more than it’s worth. CarMax will make an offer for your trade-in vehicle and give you seven days to compare your options.

Another feature worth mentioning — one that is often noted in CarMax reviews — is its three-day payoff program, which allows financing changes at no extra cost. This gives you more time to find the best deal, even after you’ve made your purchase, and saves you from having to figure out how to swap car loans further down the track.

Managing your CarMax auto finance account is relatively straightforward, too. Payments can be made online, by check, or via Western Union and MoneyGram. You can also select the date of your first payment to coincide with your payday.

Pros

  • Getting approval with less-than-perfect credit — CarMax works with multiple lenders, which means you can be approved even if you’re a first-time buyer or you don’t have the best credit score.
  • Time to get the best deal — The three-day payoff program gives you time to compare deals and find the one that suits you best.
  • Know your shopping budget — Getting pre-approved gives you a clear budget and makes your search more efficient. It also allows you to focus on getting the best vehicle in your price range.
  • Quick approval — If you apply for CarMax auto finance, you can expect a decision in 20 minutes or less.  
  • Shop without pressure — Consistent with the brand’s no pressure ethos, you can expect your auto loan experience with CarMax finance to also be hassle-free.

Cons

  • You may not get the best interest rate — CarMax’s rates might be higher compared to DriveTime interest rates or deals from other lenders. Remember, though, that CarMax differentiates itself by catering to a broad range of buyers and offering an unrivaled range of quality-checked vehicles.
  • Having to complete a purchase onsite — While you can browse for your ideal car online, you’ll need to buy it at a dealership.
  • Having to buy from CarMax — Financing through CarMax means you’ll have to buy a CarMax vehicle, but this may not be a problem given CarMax’s large inventory and strong certification program.

How to apply for a loan

Here is a step-by-step process to apply for your auto loan:

  1. Start by finding out your credit score. The range of scores run from exceptional (800+ FICO score) to poor or very poor (<580 FICO score).
  2. Determine your downpayment (or trade-in if applicable).
  3. Work out a manageable monthly car repayment. Consider using a car payment calculator to play around with the term length and vehicle price to figure out a preliminary vehicle budget matching your ideal monthly repayment.
  4. Complete an online pre-approval application using the information gathered from using the steps above. You’ll also need to provide personal details as well as income and employment information.
  5. Once have you have been pre-approved, shop for a vehicle within the pre-approved limit.

Mistakes to avoid when applying

A common mistake to avoid is not checking your credit score and credit report before applying. Lenders look at this information to understand how you managed financial obligations, such as personal loans and credit cards, in the past. However, errors sometimes occur, so it’s important to correct credit records before lenders review them.

Remember to pay attention to the overall cost of a loan, too, as low monthly repayments can actually result in higher overall costs if the loan term is lengthy.

Alternatives to consider

What other financing alternatives are there if you can’t access a car loan?

Well, you might consider borrowing from a bank or credit union you already have a relationship with. You could have a greater chance of being approved, and they may even offer a better interest rate. You could also look for an online lender who specializes in loans for buyers with less-than-perfect credit. However, interest rates from these lenders tend to be sky-high.

If you can afford to wait, saving up a bigger downpayment and/or improving your credit profile first could make auto financing cheaper and more accessible. Your options really open up with a better credit score. Apart from an auto loan or bank loan, you could also consider a car lease.

The final word

While you might not get the lowest interest rate with CarMax auto finance, it’s worth considering if you value convenience and are put off by the idea of having to negotiate your next car loan. CarMax finance works with multiple lenders, so first-time buyers or those without strong credit might find it easier to be approved. The three-day payoff program is a fantastic feature, as it allows customers more time to get the best financing deal without penalty.

Although you’re restricted to buying your used vehicle from CarMax, this dealer has over 50,000 quality-checked vehicles in its inventory. Remember, CarMax operates a “no haggling” policy — so it’s great if you’re after a transparent buying process.

Kristie Kwok

Personal Finance Contributor

Kristie Kwok is a finance content writer with in-depth knowledge of the banking industry from her previous work experience in banks such as UBS, Lloyds Banking Group and Royal Bank of Scotland. She is a qualified accountant with a Bachelor of Commerce degree, specializing in Accounting and Finance.