CarMax Earnings Plunge Signals Market Shift

Oct 5, 2022 2 min read
CarMax Earnings Plunge Signals Market Shift

Here we go!

Thanks to all the pandemic lockdowns around the world, supply shortages including processor chips, aluminum, even glass crippled new car production. Automakers didn’t predict a surge in demand for new cars, sending the prices of both new and used vehicles soaring. If you’ve been waiting out the market insanity, there have been growing signs prices are and will continue to deflate, including a big one from CarMax.

Learn more about how the used car market bubble is bursting here.

The company reported sales for August, July, and June decreased as investors reacted, sending shares plunging last Thursday. This might not seem like a big deal, but what you might not know is CarMax doesn’t just sell to consumers, it does a lot of wholesale deals, so this is a shadow of things to come not only for used cars but also the new market.

Speaking with The Detroit News, Chris Frey of Cox Automotive called the CarMax sales drop a “correction period” which should mean prices are going to come down to a saner level. If you’ve been looking for a new or used vehicle, you probably already know dealerships and even some private sellers only want a few limbs or your firstborn.

Demand is definitely in decline. In part that could be from people who have decided to wait until prices go back to what they were pre-pandemic. With rising interest rates, low-income shoppers who depend on financing to buy a vehicle have been squeezed out of the market. And with everyone paying more for essential items, suddenly having a nice, new car just isn’t a top priority. Plus, a lot of people have been selling off extra vehicles as they fear future economic calamity.

According to The Detroit News, dealers are changing what they’re doing with trade-in vehicles. They used to take most to auctions, with the nicest examples fetching way more than what they paid, making for a tidy profit. Now, many are putting trade-ins on their own used lots, hoping consumers will bite on a decent price. But if shoppers keep foregoing buying those vehicles, prices will have to come down.

Source: The Detroit News

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