Falling consumer confidence and affordability issues have led to a drop in used car sales at CarMax, financial details released by the company reveal.
In the fourth quarter of 2021, CarMax sold 5.2 per cent fewer vehicles compared to the third quarter, down to 194,318 vehicles. One reason for the decline is that the average price of a used car is now higher than ever before, sitting at $29,312 in Q4.
“Right after we saw the [omicron] COVID surge, we started seeing a lack of consumer confidence,” CarMax chief executive Bill Nash said during the retailer’s earnings call. “From an affordability standpoint, you’ve got interest rates going up, inflation, the Ukraine-Russia war … there’s just a lot weighing on the consumer right now.”
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CarMax’s used vehicle sales decline is mirrored across the broader industry. In fact, data from the Bureau of Labor Statistics reveals that the consumer price index tracking used vehicles dropped 3.8 per cent in March compared to February.
It wasn’t all bad news for CarMax, however. The company completed 149,095 wholesale vehicle sales in the final quarter, a 44 per cent increase from a year prior. Total wholesale vehicle gross profit also jumped 73 per cent to $177.5 million in the quarter while profit per vehicle rose by $201 to $1,191.
More broadly, CarMax’s net earnings fell 24 per cent in the quarter to $159.8 million while revenue spiked by 49 per cent to $7.7 billion.
The company also confirmed that it purchased approximately 1,412,000 vehicles from consumers for the fiscal year that ended February 28, 2022. Of these, 707,000 were purchased through its online instant appraisal offerings service.
