CarMax's 2026 Q1 Earnings Call: Unraveling Contradictions in Used Car Sales, CAF Growth, and Market Strategies

Used car sales momentum and market factors, CAF penetration and growth strategy, market share and market gain strategy, and CarMax Auto Finance growth strategy are the key contradictions discussed in CarMax's latest 2026Q1 earnings call.



Revenue and Sales Growth:
- CarMax reported total sales of $7.5 billion for Q1, up 6% compared to the previous year, reflecting higher volume despite lower prices.
- The company saw a 9% increase in total unit sales in the retail business, with used unit comps up 8.1%.
- The growth was driven by a strong omnichannel experience, diverse business segments, and effective inventory management.

Gross Profit and Margin Improvement:
- CarMax achieved a retail gross profit per used unit of $2,407, an all-time record, driven by strong demand and operational efficiencies.
- Wholesale unit sales increased 1.2%, with a wholesale gross profit per unit of $1,047, which was historically strong.
- This improvement was attributed to better demand forecasting, pricing strategies, and enhanced reconditioning operations.

Credit and Lending Strategy:
- CarMax Auto Finance originated over $2.3 billion, with a net interest margin of 6.5%, up over 30 basis points from the previous year.
- CAF's penetration was slightly down, primarily due to an influx of self-funded higher credit purchasers and a higher Tier 3 penetration.
- The company is exploring off-balance sheet funding vehicles to mitigate risk and support the continued expansion of its full credit spectrum underwriting and funding model.

Cost Efficiency and SG&A Leverage:
- SG&A expenses were $660 million, up 3% or $21 million from the prior year, but SG&A as a percent of gross profit improved by 680 basis points to 74%.
- This was achieved through cost coverage, volume-based leverage, and efficiencies across the business.
- The leveraging of SG&A is a key focus to sustain operational efficiency and drive long-term shareholder value.