CarMax Broke Every Rule of Post-Pandemic Car Sales… And Had Its Best Quarter Since 2021

So I’ve been car shopping lately. And let me tell you, it’s been one of the most soul-draining experiences of my adult life… somewhere between staining a deck in July and trying to explain options trading to my parents. You walk into a dealership thinking, “I’ll grab a basic Toyota,” and five minutes later reality hits that you’re gonna have to spend about double than you were originally thinking. Of course, interest rates are still sky high. Inventory’s still weird thanks to that one chip factory in Asia that burned down 5 years ago. And don’t even get me started on “market adjustment” fees.

Meanwhile, CarMax just proved that their business model is able to sidestep a lot of what turns people off on buying cars… and this quarter’s earnings made that clear as mud.

CarMax reported $1.38 in earnings per share, handily beating Wall Street’s $1.16 estimate. Revenue came in at $7.55 billion, up 6% from last year and just above expectations. But what really stood out (and I know this might sound crazy in a year where most people can’t afford a decent sandwich) is that used car sales actually surged 9% year-over-year. That’s CarMax’s biggest jump since 2021, when people were panic-buying anything that ran with their stimulus checks.

Now you’d think that would be bad news for consumers. Like, “Oh great, used cars are expensive again.” But what’s happening here is a little more nuanced. The price gap between new and used cars has gotten so ridiculous (thanks to tariffs, supply constraints, and automakers acting like every trim is a luxury model) that people are finally starting to tap out. Used cars aren’t cheap, but they’re less expensive, and right now that’s enough. For most Americans, it’s not about getting a deal anymore. It’s about not getting completely screwed.

CarMax moved 230,000 used units in the quarter… strong performance by any measure. For context, Carvana sold 134,000 in the same period. That 46% jump for Carvana might look impressive on paper, but it's what you'd expect from a company bouncing off the bottom. CarMax, by contrast, is operating from a position of consistency, not recovery… and that’s a much stronger signal when you're a Wall Street analyst evaluating the fundamentals.

What’s even more interesting is their pricing strategy. Average selling price dipped 1.5% to $26,120. That might not sound like a big deal, but in this market with hundreds of thousands of cars, that’s a bold strategy, cotton (as Jason Bateman said). Most companies would be tempted to milk the inflated prices for as long as they can… and believe me, some still are. But CarMax is clearly thinking longer-term, betting that pricing discipline will drive more units, more loyalty, and more gross profit per unit down the road. And based on the 13% increase in total gross profit to $893.6 million, it looks like that bet is working.

On the supply side, they’re not slowing down either. CarMax purchased 336,000 vehicles last quarter, up 7% from last year, including a massive 38% increase in dealer-sourced inventory. That tells me they’re not just relying on consumers walking in to trade in their beaters… they’re actively managing supply and scooping up inventory wherever they can find value. That’s a smart, scalable move, especially as the industry continues to grapple with supply weirdness.

Now, CEO Bill Nash gave the usual polished corporate response… something about their “best in class omni channel experience” and “sharp focus on execution.” I get it, he has to say those things. But let’s call it what it is: CarMax crushed this quarter. They’re adapting better than just about anyone in the space.

So here’s my take: CarMax is interesting here. The stock popped 10% premarket after earnings and closed the day up 6.6% to $68.56. It’s still down 15% on the year, which might scare some people off… but honestly, that just makes it more attractive if you believe used car demand stays strong and they keep executing like this. I know buying a stock tied to car sales in this economy might feel counterintuitive, but remember, this isn’t about new cars. It’s about affordability. And right now, CarMax owns that lane.

At the time this article was published Stocks.News does not hold positions in companies mentioned in article.