With used vehicle wholesale prices declining, CarMax Auto Finance may benefit from reduced collateral depreciation risk. This could tighten spreads between risk-adjusted return and funding costs, supporting KMX valuation multiples. Steep competition from auto dealerships and a skittish customer base wary of large purchases pose a challenge for CarMax. Used car prices are dropping due to consumer fears over tariffs and the economy, while competition is driving up the price of acquiring vehicles. All told, it’s going to be a rough six months for CarMax, particularly as new vehicles from automakers start hitting lots and bold consumers look to trade their cars in for something new. Strategic pivots or adaptations required from CarMax include: The auto finance unit’s securitization performance remains steady, a key signal for bond investors assessing CarMax’s ability to raise funds at competitive rates. Credit enhancement levels have held above industry norms, bolstering asset-backed securities.
