CarMax, Inc. is a used vehicle retailer based in the United States. The first CarMax retail location opened in September 1993 in Richmond, Virginia. As of October 2022, CarMax operates 238 locations.

CarMax offers a broad selection of quality used vehicles and related products and services at competitive, no-haggle prices using a customer-friendly sales process. CarMax is the United States’ largest retailer of used cars, which sold 807,823 used vehicles at retail in 2022.

CarMax is also one of the nation’s largest operators of wholesale vehicle auctions, with 585,071 vehicles sold during fiscal 2023 and one of the nation’s largest providers of used vehicle financing, servicing approximately 1.1 million customer accounts. 

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CarMax’s omnichannel platform, which gives it the largest addressable market in the used car industry, empowers retail customers to buy a car on their terms – online, in-store, or an integrated combination of both. 

How does CarMax Business work?

CarMax operates in two reportable segments: CarMax Sales Operations and CarMax Auto Finance (“CAF”). 

  • CarMax’s Sales Operations segment consists of all aspects of its auto merchandising and service operations, excluding financing provided by CAF. 
  • CAF segment consists solely of its own finance operation that provides financing to customers buying retail vehicles from CarMax.

CarMax Sales Operations 

CarMax’s Sales Operations segment sells used vehicles, purchases used vehicles from customers and other sources, sells related products and services, and arranges customer financing options. 

CarMax enables its customers to separately evaluate each component of the sales process based on comprehensive information about each component’s terms and associated prices. Customers can accept or decline any individual element of the offer without affecting the price or terms of any other offer component. 

Purchasing a Vehicle: The vehicle purchase process at CarMax differs fundamentally from the traditional auto retail experience. CarMax allows customers to shop for vehicles as they shop for other consumer products. 

CarMax‘s omnichannel platform further empowers customers to buy a car on their terms – online, in-store, or an integrated combination of both. CarMax’s omnichannel platform provides multiple ways for customers to interact with the company, including online. 

Selling a Vehicle: CarMax has separated the practice of trading in a used vehicle in conjunction with purchasing another vehicle into two distinct and independent transactions. CarMax appraises a customer’s vehicle in person, free of charge. It makes a written, guaranteed offer to buy that vehicle regardless of whether the owner is purchasing a vehicle from them. 

In fiscal 2023, CarMax purchased approximately 1.2 million vehicles from consumers and dealers. Based on age, mileage, or condition, approximately half of the vehicles acquired through its appraisal processes meet its retail standards. Those vehicles that do not meet its retail standards are sold to licensed dealers through CarMax’s wholesale auctions. For fiscal 2023, CarMax’s average auction sales rate was approximately 95%.

Financing a Vehicle: The availability of financing is a critical component of the vehicle purchase process, and having an array of finance sources increases approvals, expands access to financing for its customers, and mitigates risk to CarMax. 

In fiscal 2023, CarMax completed the nationwide rollout of its pre-qualification and finance-based shopping products, which CAF and multiple third-party providers support. These products enable customers to request pre-qualification online without impacting credit scores and receive their decisions and terms within minutes, empowering them to conveniently shop with their personalized pre-qualification terms across its nationwide inventory. 

Related Products and Services: CarMax provides customers with various related products and services, including extended protection plan (“EPP”) products and vehicle repair services. 

CarMax Auto Finance (CAF)

CAF provides financing solely to customers buying retail vehicles from CarMax. CAF allows CarMax to manage its reliance on third-party finance providers and leverage its business knowledge to provide qualifying customers with a competitive financing option. 

CAF utilizes proprietary scoring models based on the credit history and other credit data of the customer, along with CAF’s historical experience, to predict the likelihood of customer repayment. Because CAF offers financing solely to CarMax customers, its scoring models are optimized for the CarMax channel. 

Source: Annual Report

Products and Services of CarMax

Retail Merchandising: CarMax offers customers a broad selection of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles, at competitive prices. CarMax’s focus is vehicles that are 0 to 10 years old; these vehicles have historically ranged in price from $11,000 to $37,000. The mix of CarMax’s used vehicle inventory by make, model, and age will vary from time to time, depending on consumer preferences, seasonality, market pricing, and availability. 

Wholesale Auctions: The typical vehicle sold at CarMax’s wholesale auctions is approximately 10 years old and has more than 100,000 miles. CarMax provides condition disclosures on each vehicle, including those for vehicles with major mechanical issues, possible frame or flood damage, branded titles, salvage history, and unknown true mileage. Dealers pay a fee to CarMax based on the sales price of the vehicles they purchase. 

Extended Protection Plans: CarMax offers customers EPP products in conjunction with the sale of a vehicle. 

Reconditioning and Service: An integral part of CarMax’s used car consumer offer is the reconditioning process designed to ensure every car meets its internal standards before becoming a CarMax Quality Certified vehicle. This process includes an inspection of the engine and all major systems. Based on this inspection, CarMax determines the necessary reconditioning to bring the vehicle to its internal quality standards. 

Customer Credit: CarMax offers financing alternatives for retail customers across a wide range of the credit spectrum through CAF and arrangements with several financial institutions. Vehicles are financed using retail installment contracts secured by the vehicle. As of February 28, 2023, CarMax’s third-party finance providers included Ally Financial, American Credit Acceptance, Capital One Auto Finance, Chase Auto Finance, Exeter Finance Corp., Santander Consumer USA, and Westlake Financial Services. 

Marketing and Advertising Strategy of CarMax

CarMax’s marketing strategies are focused on driving customer growth through building awareness and affinity for the brand and acquiring in-market shoppers and sellers. These strategies are implemented through a broad range of media including, but not limited to, traditional broadcast, digital, search, social, out-of-home, sports sponsorships, and newer influencer and activation programs. 

CarMax’s website and related mobile app received an average of 31 million monthly visits during fiscal 2023 and are a critical part of the customer’s journey, allowing them to learn about CarMax, explore its full inventory in real-time, initiate vehicle transfers, apply for financing pre-qualification, receive an appraisal offer and even buy entirely online. 

In fiscal 2023, CarMax continued building the CarMax brand through new creative campaigns and approaches promoting instant offers and its Love Your Car Guarantee. CarMax highlighted its 30-day money-back guarantee in its Car Buying Reimagined campaign this fall. In addition, CarMax’s Call Your Shot campaign showcased the flexibility of CarMax’s omnichannel experience.


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