CarMax reported that its financial arm closed fewer auto loans due to higher interest rates
CarMax reported that its financial arm closed fewer auto loans due to higher interest rates
A report from CarMax (KMX) may provide insights into the banks. KMX missed on earnings despite higher-than-expected revenues. According to Barrons, the company is struggling with inflation pressures as indicated by its 11% increase in sales year-over-year but a drop of 5.2% in sales volume year-over-year and a 6.5% drop in same store sales for the quarter.
KMX’s financing arm closed fewer loans due to higher interest rates, higher prices, and low inventory, which deterred consumers from buying cars. The company also set aside more money to hedge against bad loans. CarMax shares fell more than 4% in pre-market trading.
If banks go the way that CarMax’s financial arm did, then we may see lower demand for loans due to higher interest rates and higher prices. And banks may also be fearing loan defaults as consumers’ pocketbooks are stretched to deal with rising inflation. Of course, CarMax isn’t just a warning for banks but also other car companies.
