CarMax, Inc. (KMX) Business Profile

What it does

CarMax buys and sells used vehicles in the United States. It sells cars to individual consumers at fixed, no-haggle prices and offers financing, protection plans and repair services alongside them. Customers can shop online, visit a store or combine the two. They can also sell a vehicle to CarMax without buying another one.

The company appraises vehicles from consumers and dealers. It reconditions those that meet its retail standards and sells vehicles that do not meet those standards to licensed dealers through wholesale auctions. CarMax owns the vehicles it sells at those auctions, rather than acting only as an intermediary.

CarMax Auto Finance provides loans exclusively to customers buying retail vehicles from CarMax. The company also arranges financing through outside lenders. Its Edmunds business provides automotive information and supports the MaxOffer vehicle-buying product for dealers.

Founded in 1993, CarMax is headquartered in Goochland County. Keith Barr is president and chief executive officer. As of February 28, 2026, the company operated 256 used car stores in 110 U.S. television markets. In fiscal 2026, it sold 780,684 used vehicles at retail and 538,203 vehicles through wholesale auctions.

How it makes money

In FY2026, used vehicle sales revenue was $20.7 billion; in the second quarter of fiscal 2027, total sales were $7.9 billion.

CarMax has two reporting segments. Sales Operations buys, reconditions and sells used cars, operates wholesale auctions, sells related products and services, and arranges financing from outside lenders. CarMax Auto Finance, or CAF, lends to its retail vehicle customers and services the loans it originates.

Retail vehicle sales accounted for 80.0% of revenue in FY2026. Wholesale vehicle sales contributed $4.5 billion. Licensed dealers pay a fee based on the price of vehicles they buy at CarMax auctions. Retail customers can accept or decline financing and other products separately without changing the price or terms of another part of the transaction.

The company also earns revenue selling extended protection plans on behalf of outside providers. Those providers are primarily responsible for customer claims; CarMax may also receive profit-sharing revenue based on the performance of certain plans. Advertising, subscriptions and vehicle repair services are other revenue sources. In fiscal 2026, approximately 52% of retail vehicle buyers purchased an extended service plan.

CAF earns interest and fees on auto loans, while incurring funding costs, provisions for estimated loan losses and direct expenses. It financed 42.4% of CarMax’s retail used vehicle unit sales in fiscal 2026, after payoffs and returns. Loan interest and servicing extend beyond the initial vehicle sale, although vehicle sales themselves are transactions rather than subscriptions. CarMax says the timing and mix of financing transactions can cause reported income and provision expense to vary between quarters.

Customers and how it sells

CarMax serves individual buyers and sellers of used cars across the United States. Its wholesale auctions serve licensed dealers, while MaxOffer provides dealers with digital appraisals and offers to buy their vehicles. CAF lends only to customers buying retail vehicles from CarMax; other financing providers also serve those buyers.

As of February 28, 2026, the company’s 256 stores covered approximately 85% of the U.S. population. Its website and app let customers view nationwide inventory, request vehicle transfers, seek financing pre-qualification, receive appraisal offers and buy a vehicle online. Customers can also work with associates by phone, text, chat or in person.

In fiscal 2026, approximately 94% of customers who bought a vehicle had first visited CarMax online, and approximately 81% used some or all of its digital capabilities to complete their transactions. Approximately 38% of vehicles sold were transferred at a customer’s request.

CarMax appraises vehicles and makes offers even when the owner is not buying from it. It purchased approximately 1.1 million vehicles from consumers and dealers in fiscal 2026. Its stores typically see their strongest traffic and sales in spring and summer, with an additional increase in February and March around federal income tax refunds.

Suppliers and costs

CarMax obtains used vehicles directly from consumers, dealers, auctions, wholesalers and fleet owners, including leasing and rental companies. Approximately half of the vehicles acquired through its appraisal processes meet its retail standards; the rest are sold to dealers through wholesale auctions. CarMax does not manufacture the vehicles it sells.

The company inspects and reconditions every retail vehicle. It performs most routine mechanical and minor body repairs in-house, while using outside specialists for some services. Many stores use nearby, larger CarMax locations for reconditioning, and stand-alone centers help balance capacity across the network. Vehicle acquisition, reconditioning and logistics therefore form part of the cost of bringing cars to market.

CarMax uses several outside lenders and protection-plan providers. As of February 28, 2026, Safe-Guard Products International LLC was its guaranteed asset protection provider, while multiple companies supplied extended service plans.

In the second quarter of fiscal 2027, CarMax said higher diesel prices had increased costs, but efficiencies elsewhere had offset the impact. It also said dealer-sourced cars were generally less profitable than those bought directly from consumers, but more profitable than cars bought at auction.

Competitive position

CarMax competes for retail buyers and vehicle inventory with franchised dealerships, independent used-car dealers, online and mobile sales platforms, and private sellers. Its wholesale auctions compete with other in-person and online automotive auctions. CAF competes for borrowers principally with banks and credit unions offering direct vehicle financing. No individual competing company is named in the supplied business descriptions.

CarMax estimates it sold approximately 3.6% of the nation’s used vehicles aged 0 to 10 years in calendar 2025, down from 3.7% in calendar 2024. It identifies no-haggle pricing, nationwide selection, financing, store locations and its online-to-store experience among its competitive advantages. Its appraisal process also supplies vehicles for both retail sales and wholesale auctions.

Our reading: The store network, vehicle sourcing and ability to move inventory across locations are meaningful advantages because they support both selection and a route to sell cars that do not meet retail standards. [item1]

Our reading: The digital platform and pricing systems offer some differentiation, but their protection is limited by rivals’ online tools and access to dealer software for sourcing and pricing. [item1] [item1a]

Our reading: CAF’s position at the point of sale supports the offer, but the financing advantage is constrained by competing banks and credit unions and customers’ ability to use other lenders. [item1] [item1a]

Growth opportunities

CarMax’s growth plans center on vehicle pricing and selection, an easier online and in-store experience, greater financing participation and lower operating costs. It is investing in digital capabilities, store and capacity expansion, and CAF’s ability to lend across a wider range of credit profiles.

The company estimates that approximately 39 million used vehicles were sold in the U.S. in calendar 2025, including approximately 20 million aged 0 to 10 years. It planned to open four stores, two stand-alone reconditioning and auction centers, and two stand-alone auction facilities in fiscal 2027. These facilities are intended to balance capacity across its network.

In the second quarter of fiscal 2027, comparable used vehicle unit sales grew 13% and total used unit sales grew 14% from a year earlier. CarMax attributed the sales performance primarily to more competitive pricing and said it had improved pricing algorithms and reduced reconditioning costs. Retail gross profit per used unit was $2,105, down $111 per unit from the prior-year quarter.

CarMax has redesigned its extended protection plans and introduced a wheel, tire and dent product. It expects approximately $35 per unit in incremental protection-plan margin for fiscal 2027. The company also remains on track, in its view, for a $200 million fiscal 2027 exit-rate target for selling, general and administrative expense savings. It expects full-year retail margin per unit to decline by less than $200 per unit compared with fiscal 2026.

Structural risks

• Competition: Dealers and online platforms compete for both buyers and vehicle inventory. Rivals have replicated parts of CarMax’s offer, and online appraisal tools can direct sellers to other dealers.
• Affordability and supply: Economic conditions, interest rates and vehicle prices can reduce demand or credit availability. A tighter supply of late-model used vehicles can increase acquisition costs and reduce margins.
• Inventory depreciation: Used vehicles can lose value while held in inventory. Steep market depreciation or difficulty liquidating vehicles can reduce retail and wholesale margins.
• Financing and credit: CAF borrowers may not repay their loans, and the vehicles securing those loans may not cover losses. CarMax also relies on securitization to fund most CAF originations; disruption could raise funding costs or curtail lending.
• Third-party dependence: Outside lenders finance a significant portion of customers’ purchases. If lenders or protection-plan providers withdraw, reduce availability or change terms, CarMax’s sales and results could suffer.
• Execution and reputation: CarMax may not realize the expected benefits of its digital and AI investments. Problems with sales, financing, vehicle quality or customer experience could also damage trust in its brand.

Bottom line

Our reading

Our reading: CarMax combines used-car retailing with a sourcing and auction network and an in-house lender, so each vehicle can generate several opportunities for revenue. [item1] [item7]

Our reading: Its network and customer appraisal process support selection and inventory sourcing, but they do not remove exposure to competition, vehicle depreciation or consumers’ access to affordable credit. [item1] [item1a]

Our reading: Recent unit growth came alongside lower retail gross profit per vehicle, making the company’s ability to sustain sales while managing costs and financing risk important to its operating results. [call_prepared] [item1a]