CarMax Auto Finance originations up 5.5%

CarMax Auto Finance ’s originations increased in the first quarter of fiscal 2027 as CarMax expanded its full-spectrum auto lending strategy and gained finance penetration. CarMax Auto Finance (CAF)’s net loans originated totalled $2.4 billion in the quarter that ended May 31, up 5.5% year over year , according to a June 17 CarMax earnings release. CAF income totalled $140.2 million, down 1% YoY. Its net penetration rate was 43.3%, up 150 basis points (bps) YoY, reflecting continued execution of CarMax’s full-spectrum growth strategy, Jon Daniels , executive vice president of CAF, said during the company’s earnings call. Net interest margin across CAF’s portfolio was 6.7%, up 20 bps YoY. The weighted average contract rate was 11.3% compared with 11.4% a year earlier. With the company’s expanded full-spectrum auto lending strategy, penetration rate prior to the impact of three-day payoffs across tiers was as follows in Q1, according to the release: CAF: 45.7%, up 130 bps YoY; Tier 2: 15.7%, down 200 bps YoY; Tier 3: 9%, up 100 bps YoY; and Other: 29.6%, down 30 bps YoY. Tier 2 originations include third-party financiers that either pay CAF a fee or to whom CAF does not pay a fee. “This significant increase in CAF penetration ... is a direct result of our enhanced funding and underwriting efforts,” Daniels said. “CAF was the largest Tier 2 lender during the quarter, further demonstrating the progress we are making in our full-spectrum efforts .” Credit conditions improve Meanwhile, CAF’s provision for loan losses was $95.6 million, down 6% YoY, according to the release. However, the quarter included a $25.1 million benefit tied to the release of allowance previously recorded for loans now classified as held for sale. The allowance for loan losses totaled $475 million, or 2.95% of auto loans held for investment, according to CarMax. The coverage ratio was up 19 bps YoY and 17 bps compared to the previous quarter. Credit losses were in line with expectations, Daniels said, adding that the increase in the allowance ratio was driven primarily by seasonality and growth in Tier 2 originations. Sales edge higher CarMax’s used-vehicle retail sales were mostly flat YoY at 230,293 units in Q1 compared with 230,210 in the prior-year period, according to the release. Combined retail and wholesale used-vehicle unit sales totaled 392,357, up 3.3% YoY. Wholesale vehicle unit sales increased 8.4% YoY to 162,064. The average selling price for a used vehicle was $27,288, up 4.5% YoY, according to the release. Gross profit per used retail unit was $2,177, down 9.6% YoY, reflecting pricing actions aimed at improving sales. Four-pillar strategy Chief Executive Keith Barr introduced a four-pillar CarMax growth strategy during the call that focuses on: Competitive pricing and broader vehicle selection; Improving the digital and in-store customer experience; Growing profitability through CAF and extended protection plans; and Lowering costs through decreasing reconditioning, logistics and selling, general and administrative expenses. “We know exactly what needs to change and we’re moving forward with urgency,” Barr said. CarMax’s total net revenue rose 6.2% YoY to $8 billion, while net earnings per diluted share was $1.31 compared with $1.38 a year earlier, according to the release. Selling, general and administrative expenses (SG&A) decreased 3.7% YoY to $635.2 million, according to the release. CarMax remains on track to achieve $200 million in exit-rate SG&A savings by the end of fiscal 2027. Shares of CarMax [ NYSE: KMX ] were $47.43 at market close today, down 8.98% or $4.68 from market open. CarMax has a market cap of $6.73 billion. Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 5-7 at Caesars Las Vegas. To learn more about the 2026 event and register for early-bird pricing through Aug. 21, visit www.AutoFinance.live/AFS .

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