New York
CNN Business
—
High prices and rising interest rates are putting used cars out of reach for a growing number of car buyers.
That’s bad news for CarMax, the nation’s largest used car retailer. CarMax reported Thursday that its revenue fell 54% as the number of vehicles it sold in the quarter fell 6.4% from a year earlier.
The company blamedcar affordability issues This is due to widespread inflationary pressures, as well as rising interest rates and low consumer confidence.”
Although the higher prices boosted the company’s overall revenue, the results were well below the forecasts of analysts polled by Refinitiv. This raised alarm bells for investors. CarMax
(KMX) shares fell more than 24% on Thursday, and shares of other auto retailers were also hammered. Shares in used car rival Carvana
(CVNA) decreased by about 23% and AutoNation
(AN), the country’s largest new car dealer, has fallen by 10%. Shares of many automakers, including General Motors
(GM)Yes, Ford
(F)Stellantis and Tesla
(TSLA)was also low.
Car prices have risen steadily over the past two years as shortages of parts, particularly computer chips, have limited supply in the face of strong consumer demand. These high prices have generally been a major factor inflationary pressures because about 40% of US households buy a car each year.
Attempts to control prices have fueled this The Federal Reserve will raise interest rates at a historic pace in recent months as the central bank tries to curb consumer demand and slow the economy.
According to the Consumer Price Index, the main measure of inflation, used car prices – although down 2% in August from a record high in January – were still up 48% from August 2019. New car prices it rose 30% over the past three years and set a record in August.
CarMax reported an average car sales price of $28,657 in the three months ending in August, up 9.6% from a year earlier but down 1% from the previous quarter.
But according to CarMax executives, it’s not just the cost of buying and financing the car that’s driving sales. Overall, the overall pressures on household budgets from higher prices have become a problem.
“Grocery store higher than ever,” CarMax CEO William Nash said on a call with investors. “Consumer confidence, certainly the lowest for the quarter to date, well below the peak of the pandemic. Therefore, I think that consumers prioritize their spending a little differently.”
The company’s results were also hurt by increased provisions to cover potential loan losses in its financial arm. CarMax more than doubled its reserves of $35.5 million a year ago to $75.5 million at the end of the most recent quarter.
