Don’t Sell CarMax: Cramer’s Contrarian Take on the Auto Retailer

Jim Cramer, the outspoken host of Mad Money, has long been a skeptic of auto stocks, warning investors to steer clear of the sector if recession fears materialize. Yet, in early 2025, he offered a rare endorsement of CarMax (NYSE: KMX), the used-car retailer, urging investors not to sell despite broader industry headwinds. The recommendation hinges on a mix of strategic bets, shifting market dynamics, and Cramer’s belief that the worst is behind this often-underrated player in the auto retail space.

Why Cramer Says "Don’t Sell" CarMax

Cramer’s bullish call on CarMax comes amid a starkly bearish outlook for the broader auto sector. He has repeatedly cautioned that rising tariffs, inflation, and recession risks could crush demand for vehicles, particularly in the used-car market. “Don’t own autos in case of a recession,” he emphasized in a 2025 segment, citing heightened consumer sensitivity to prices after years of inflation.

Yet CarMax stands out for two key reasons: its strategic investments in digital infrastructure and a turning tide in the used-car market.

The Case for CarMax’s Resilience

1. The Online Platform Advantage
   Cramer praised CarMax’s online sales platform, which he called “the best in the industry.” The company has poured resources into digitizing the car-buying process, allowing customers to research, finance, and even complete purchases without stepping into a physical store. This strategy has helped CarMax capture younger, tech-savvy buyers and reduce reliance on foot traffic—a critical edge in an era of rising online competition.

2. Used-Car Prices Are Cooling
   A key driver of CarMax’s struggles in 2023-2024 was sky-high used-car prices, which deterred cost-conscious buyers. But Cramer noted that prices had begun to decline in the prior two quarters, making vehicles more affordable. This shift, combined with lower interest rates, could spur a rebound in sales volumes.

3. Institutional Backing
   Despite Cramer’s skepticism toward the auto sector overall, CarMax has attracted 57 hedge funds as holders as of late 2024, signaling confidence in its long-term prospects. While Cramer prioritizes AI stocks for faster returns, he acknowledged CarMax’s “choppy but improving sales trajectory” as a reason to hold rather than abandon the stock.

Risks and Contradictions

Cramer’s stance isn’t without caveats. He criticized CarMax’s earnings misses and the CEO’s lackluster communication, quipping, “They missed bad… nothing there.” The company’s exposure to auto demand also leaves it vulnerable to recession fears. If tariffs spike or the Fed raises rates again, CarMax could face renewed headwinds.

Moreover, Cramer’s broader market concerns linger: falling Treasury yields and bank forecasts of a slowdown suggest the economy—and thus the auto sector—is on shaky ground.

Data-Driven Perspective

Let’s look at the numbers:

• CarMax’s stock price has rebounded 18% since late 2024, outperforming broader auto retailers like L Brands and Penske Automotive.
• Used-car sales volumes grew 3.2% year-over-year in Q1 2025, the first expansion in 14 months, per industry data.

These trends align with Cramer’s thesis that the worst is over for CarMax.

The Bottom Line: Hold for Now

Cramer’s “don’t sell” advice isn’t a roaring buy recommendation—it’s a cautious hold for investors willing to bet on CarMax’s strategic moves and a stabilizing used-car market. While the auto sector remains risky, CarMax’s digital edge, improving affordability, and institutional support give it a fighting chance to outperform peers.

Investors should pair this stance with caution: keep a close eye on used-car price trends, Fed rate decisions, and CarMax’s upcoming earnings. If the company can sustain sales growth and leverage its online platform, Cramer’s contrarian call could pay off.

In the end, Cramer’s message is clear: the auto sector is a minefield, but CarMax isn’t dead yet.

Data as of April 2025. Past performance does not guarantee future results.