America's Car-Mart Q3 2025: Unpacking Contradictions in Underwriting, Tax Performance, and Credit Trends

These are the key contradictions discussed in America's Car-Mart, Inc.'s latest 2025 Q3 earnings call, specifically including: Underwriting and Credit Performance Improvements, Tax Season Performance, Underwriting Improvements and Impact on the Portfolio, and Credit Performance During Tax Season:



Revenue and Sales Volume Increase:
- America's Car-Mart, Inc. reported an 8.7% increase in total revenue for Q3 FY2025, despite a decline in average selling prices by 90 basis points.
- The growth was driven by a 13.2% increase in sales volumes, which was attributed to effective operational improvements and strategic planning, including early tax season promotions and inventory expansion.

Financial Performance and Credit Quality:
- The company saw improved net charge-offs as a percentage of average finance receivables, down to 6.1% compared to 6.8% in the prior year quarter.
- This improvement was primarily due to better underwriting standards and enhanced loan origination system (LOS) performance, which led to reduced loss frequency and severity in the newer portions of the portfolio.

Capital Structure Enhancements:
- America's Car-Mart extended and upsized its ABL facility to $350 million, now maturing in March 2027.
- The company also successfully closed its sixth ABS transaction, a $200 million deal that was more than 10 times oversubscribed, indicating strong market recognition of the enhanced LOS and allowing for more efficient capital structuring.

Operational Efficiency and Cost Management:
- SG&A expenses increased by 6.7%, primarily due to two acquisitions and higher stock compensation.
- Despite this, sequential SG&A expenses decreased by $947,000, reflecting ongoing efforts to improve operational efficiencies and manage costs effectively.

Used Car Affordability and Market Positioning:
- Used car affordability remained a key concern for both customers and the industry.
- Despite this, America's Car-Mart's strategic focus on originating better-quality credit and offering differentiated deal structures has positioned the company to potentially benefit from a broader addressable market as competitors tighten credit standards.