CarMax Reports Shoppers ‘Staying on Sidelines’ Amid High Interest Rates

Some would-be car buyers are putting off purchases due to higher interest rates, according to used auto retailer CarMax.

They are “staying on the sidelines” due to both interest rates and affordability issues in today’s car market, CarMax President and CEO Bill Nash said Thursday (Sept. 28) during the company’s quarterly earnings call.

“I would say the trade-in cycles are a little longer,” Nash said. “As far as how to quantify that, I can’t give you a specific number, but we absolutely see traffic flow coming in at the top of the funnel where there’s interest and, again, continue to fall off at the conversion point when people actually start to see their monthly payments.”

Despite facing challenges over the past year, CarMax has shown sequential quarterly improvement and remains optimistic about its future growth, executives said during the call.

During the quarter ended Aug. 31, CarMax’s net revenues totaled $7.1 billion, down 13.1% compared to the same period a year earlier. CarMax faced a decline in both retail and wholesale unit sales but achieved a gross profit per unit comparable to last year in both retail and wholesale sales.

Commenting on the second-quarter results, Nash said during the call: “Although our second-quarter results largely reflect the same widespread pressures that we cited over the past year, we continue to see sequential quarterly improvement across our business. We believe the deliberate steps we are taking to control what we can are supporting our business now while also positioning us well for the future.”

CarMax has been navigating the tightening credit availability, especially in the lower credit tiers. Enrique Mayor-Mora, executive vice president and chief financial officer at CarMax, emphasized the company’s focus on providing customers with access to credit by having a multitude of lenders while also optimizing finance margins and considering affordability and the risk of customers paying off with other lenders.

One of CarMax’s key strengths is its high level of self-sufficiency in sourcing inventory directly from consumers and other sources, executives said during the call. This allows the company to maintain a steady flow of sellable inventory units, even during challenging times.

CarMax remains committed to delivering a customer-centric experience and driving operational efficiencies, executives said. The company has been investing in its digital shopping experience, enhancing its customer experience centers, and testing enhancements to its auction platform.