CarMax Auto Finance’s subprime test pilot originated $72.2 million of receivables through Feb. 28, exceeding the company’s original pledge of $70 million in allotted funds for the program, according to an 8-K filed with the Securities and Exchange Commission last week.
“We intend to continue with our subprime test,” Chief Financial Officer Tom Reedy said during the company’s earnings call last week. “Recall that our primary goal for this investment was to gain knowledge regarding this space, and we expect these learnings will prove invaluable.”
Through the pilot, which CAF launched in January 2014, the company extends auto loans to subprime customers that would typically borrow from third-party lenders. In the fourth quarter of 2014, the subprime program originated $15.5 million of loans, with average terms of nearly 70 months.
“We are comfortable continuing to originate at the current target volume,” Reedy said. This target is 5% of CarMax’s subprime sales, or a little less than 2% of CAF originations.
Learn more about risk and compliance in auto finance May 18 and 19 at the Auto Finance Risk & Compliance Summit 2015 in San Diego. Register here.
