CarMax sank after its fourth-quarter used vehicle sales missed analyst estimates, with soaring prices and anxiety over the economy keeping some customers away.
The Richmond, Virginia-based company cited declining consumer confidence and affordability, among other factors, for a 6.5% drop in the number of used cars it sold last quarter in stores that have been open at least 13 months. The average price of a car rose 40%, or $8,300, in the period ended Feb. 28 compared with a year ago, CarMax said in a statement Tuesday.
The results are yet another sign that higher costs and worries about the economy are starting to take a toll on consumer behavior. Used car prices have been a major contributor to elevated inflation readings, though they have begun to slip this year.
“From an affordability standpoint, you’ve got interest rates going up, inflation, you’ve got the Ukraine-Russia war. There just a lot weighing on the consumer right now,” Bill Nash, Carmax’s chief executive officer, said on a conference call.
Shares of CarMax have fallen 21% so far this year through Monday’s close.
There may be some relief on the horizon for U.S. shoppers. The consumer price index tracking used cars and trucks fell 3.8% in March compared with February, according to the Bureau of Labor Statistics. That’s the second straight monthly decline for the category, although prices are still 35% higher than they were a year ago.
Nash told analysts that consumers are increasingly seeking loans longer than 72 months to help spread out the cost of vehicle purchases and that not all lenders are willing to extend that type of credit — especially to subprime borrowers.
For “the lower credit spectrum customer, certainly we feel affordability has maybe often priced them out of the market,” he said.