Sudden depreciation in used car values hits CarMax hard
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Used car values depreciated rapidly this summer as competitors were "aggressive" on pricing, CarMax CEO Bill Nash warned Thursday.
Why it matters: Prices had spiked earlier in 2025 as Americans rushed to snap up vehicles ahead of anticipated tariffs — but sales have tapered off since then, prompting a scramble to attract customers.
Driving the news: CarMax disappointed investors Thursday with an earnings report showing a 6.3% decline in comp sales of used vehicles.
- Investors had been expecting a 0.7% increase, according to Bloomberg.
- The company also posted a huge miss on profit and revenue for the quarter.
- CarMax shares plunged 20% Thursday.
Zoom in: CarMax saw values slip by $1,000 per vehicle in a one-month period during the quarter, leaving the company with elevated prices that scared customers away.
- "We're always focused on competitive pricing," Nash said on an earnings call. "And certainly, the focus as we go forward is to continue to be as nimble as possible because it's an aggressive environment out there."
The intrigue: Prices had been on the rise earlier this year when customers were rushing to buy vehicles ahead of tariffs.
- The Manheim Used Vehicle Value Index hit 208.5 in May, marking its highest point since September 2023 in the aftermath of the inflation crisis that spiked costs.
- But during the latest quarter, CarMax's average selling price fell $250 year-over-year to $26,000.
- Customers are seeking out "older, higher mileage vehicles," Nash said.
Yes, but: Cox Automotive is still projecting an average increase in prices of new and used vehicles of 4% to 8% due to tariffs.
- And the Consumer Price Index in August showed a 6% increase in year-over-year prices of used cars and trucks.
The bottom line: "We know that the consumer has been pressured, from a vehicle pricing and interest rate standpoint, but also with the overall inflationary environment," a CarMax spokesperson said in an email.
- The spokesperson noted that the company "responded by lowering retail margin" to drive sales and slowed car purchases — and "this strategy has worked, as both price competitiveness and inventory position have improved since that time and have put us in a better position for the third quarter."
