CarMax Auto Finance saw third quarter income decline 3.2% year over year, due to increased provisions for loan losses, and modestly decreased interest margins, in a sign that the company is expecting delinquencies to rise in the new year, CAF reported yesterday in its third quarter earnings.
CAF’s provisions have increased gradually over the year. The third quarter ended with $115 million in provisions, which represented 1.1% of all receivables (money collected from auto financing deals). Last quarter that rate sat at 1.08% and in third quarter 2015 it was at 0.97%.
“This level of losses is a departure from our experience in recent years,” said Tom Reedy, chief financial officer. “However, losses in the last several years have been quite favorable. The current level of loan loss reserve is consistent with our range of expectations given our origination strategy and portfolio mix.”
The company posted net loan originations of $1.4 million for the third quarter ending November 30, up from $1.2 million for the same period last year. For the nine month span, the company is reporting $4.2 million in net loans originated, compared to $3.9 million the year prior.