On November 6, 2025, CarMax shares fell 24 percent in a single session. The reason was clear: the sudden firing of CEO Bill Nash, combined with a warning that same-store sales would drop between 8 and 12 percent in the third quarter. For investors already down 60 percent this year, the news felt like a breaking point after months of decline.
But this is not just a story about CarMax. It is a snapshot of the wider U.S. auto market. With 250 stores, 1.4 million vehicles sold annually, and operations spanning retail, wholesale auctions, and its own financing arm, CarMax sees changes in prices, credit, and buyer behavior before the official data is released. Think of the company as the market’s early warning system.
CarMax is not perfect. Its cars average $28,000, so it misses lower-cost vehicles that make up 40 percent of the used market. Luxury programs, rural pickups, and Tesla fleet sales are also outside its footprint. To give a full picture, we compare CarMax data with Federal Reserve figures, the Manheim price index, and rivals like Carvana and Lithia.
Why CarMax Matters
CarMax is not the largest used-car seller, but it often leads trends. Last year, it sold 1.4 million used vehicles, representing about 3.7 percent of the retail market. Its revenue comes from three main sources: retail sales (70 percent), wholesale auctions (17 percent), and CarMax Auto Finance (13 percent).
When buyers hesitate, trade-ins slow, or loans default, CarMax feels it first. Its performance has historically predicted broader market trends. Over the past five years, same-store unit sales tracked total used-vehicle volume with a correlation of 0.92. Wholesale profits mirrored the Manheim Used Vehicle Value Index at 0.88, and CarMax Auto Finance delinquency rates matched subprime auto-bond defaults at 0.85. In simple terms, when CarMax struggles, the market usually follows.
The Year That Was: 2025
The year started strong. Rumors of tariffs on Mexican and Canadian car parts prompted buyers to act early. CarMax retail units jumped 8.1 percent in its second fiscal quarter. New vehicle sales reached a seasonally adjusted annual rate of 16.9 million in July, the highest since 2021. Dealer inventories grew at the fastest pace since the chip shortage years.
However, the momentum did not last. The EV tax credit expired on September 30, and tariffs never materialized. By October, total light-vehicle sales dropped 5 percent from the previous year. CarMax felt the slowdown first: used EV sales fell 30 percent month-over-month, wholesale profit per unit dropped 15 percent, and average lot times stretched to 62 days, well above the national average of 48.
Affordability and Credit Pressure
Car buyers are feeling the pinch. The average used vehicle at CarMax now costs $28,000, up 3 percent from last year, while national prices sit around $31,000. With auto loans near 7.5 percent, monthly payments take up 12.5 percent of median household income, the highest share since the Great Recession.
Credit is under stress. CarMax Auto Finance set aside over $100 million for potential loan losses in Q3. Subprime borrowers, who make up a third of the lending portfolio, are defaulting at higher rates. The broader market reflects this: Carvana paused aggressive subprime lending, and Lithia reported more buyers walking away from financed deals.
The labor market also adds pressure. In October, 153,000 layoffs were announced in retail, warehousing, and tech. Job losses reduce consumers’ ability to make monthly payments, slowing trade-ins and retail sales.
Signals from the Used Lot
CarMax’s sales mix can hint at broader trends. In Q3, hybrid vehicle sales rose 10 percent year-over-year, while traditional gas SUVs lingered on lots for more than 70 days. Nationally, used hybrid prices are softening by 5 percent, and used EV prices dropped 10 percent.
EVs are a special case. CarMax used EV sales fell 30 percent after the $7,500 tax credit expired, but prices are dropping too. A 2022 Tesla Model 3 now lists about $3,000 below last year. Affordable EVs and expanded charging infrastructure could attract younger buyers in the coming years.
Pickups remain strong in volume, with the Ford F-Series up 18 percent in Q3, but growth is slowing. Overall, the trend shows buyers prefer efficiency without range anxiety. Hybrids are gaining ground, EVs are waiting for better incentives, and traditional gas vehicles are losing momentum.
Looking Ahead: 2026 Scenarios
CarMax data points to three possible paths for next year:
Base Case: Soft Landing
- Same-store sales decline 5 percent.
- The Federal Reserve cuts rates by 1 percent.
- New vehicle sales hold at 15.8 million units.
- Used vehicle volume stays at 20 million units.
- CarMax earnings per share reach $3.00 and the stock climbs to $45.
Bear Case: Tariffs and Layoffs
- Same-store sales drop 15 percent.
- Tariffs take effect and layoffs exceed 1.5 million.
- New vehicle sales fall to 14.5 million units.
- Used vehicle volume drops to 18.5 million.
- CarMax EPS falls to $1.80 and the stock falls to $25.
Bull Case: Policy Support
- A new EV tax credit is introduced and tariffs are delayed.
- Same-store sales rise 3 percent.
- New vehicle sales reach 16.5 million units.
- Used vehicle volume grows to 21 million.
- CarMax EPS climbs to $3.80 and the stock rallies to $55.
The base case is the consensus view. The bear case is largely priced in after this year’s decline. The bull case requires government action first.
CarMax’s Response and Risks
CarMax plans to open 20 new stores in 2026 and improve digital tools, including its app and online appraisal service. Marketing is up 12 percent, emphasizing no-haggle pricing to attract budget-conscious buyers.
Risks remain. Pending lawsuits could cost over $50 million. Wholesale margins remain pressured until trade-ins recover. Online rivals like Carvana continue to take market share. Leadership changes are critical: a new CEO must manage credit and wholesale sourcing without alienating CarMax’s core customers.
The Key Numbers to Watch
Investors will be looking at three indicators when CarMax reports Q3 earnings on December 18:
- Same-store sales
- Wholesale gross profit per vehicle
- Auto loan loss rates
These figures act as an early warning for the broader auto market. If they improve, the sector may stabilize. Long-term, the used market is expected to grow 1.5 percent annually through 2030, with hybrids leading the volume and affordable EVs potentially creating a second wave of growth.
CarMax may not be the whole auto market, but it is often the first to feel shifts in demand, credit, and consumer confidence. When CarMax recovers, the market usually follows. Until then, buyers are cautious, loans are stressed, and the market waits for stability.
Conclusion
CarMax’s recent struggles are more than a company story, they are a window into the health of the entire U.S. auto market. Rising vehicle prices, higher loan rates, and slowing consumer confidence are creating real stress for buyers and lenders alike. CarMax’s data shows where the market is faltering, which segments are shifting, and which trends may signal recovery.
Looking ahead, the path for 2026 is uncertain. A soft landing is possible if interest rates ease and consumer confidence stabilizes. Conversely, tariffs, layoffs, or continued credit strain could deepen the downturn. Yet opportunities remain: hybrids are gaining ground, and affordable EVs could attract a new wave of buyers if incentives and infrastructure improve.
For investors and industry watchers, the message is clear: CarMax’s performance is an early warning system. Its sales, wholesale margins, and loan performance reveal market shifts before they appear in national statistics. By watching these indicators closely, we gain a clearer picture of the direction of the auto market, helping businesses, policymakers, and consumers navigate the challenges ahead.
