As the national economic climate remains unsavory, consumers seek cheap options for automobile purchases and are on the look out for late-model used cars in particular. Despite a sales environment that is considerably less favorable than that of 2007 and 2008, before the recession, total sales have increased by 9% in the first quarter of 2011, indicating the consumers are looking for bargain values when shopping for cars. Driving this increase in total sales are similar increases in used vehicle sales, new vehicle sales, and wholesale vehicle sales.
CarMax exists in a highly fragmented retail segment. As the only real player in Nationwide used car sales and the recent closer of L2 (Lithia Motors) unsuccessful attempt to copy CarMax's business Model only proves CarMax's competitive advantage has already swelled beyond contest. In 10 years this will be the Bestbuy of the used car industry.
High turn rate and volume sales ensure the companies inventory levels are always lean. This in turn allows them to react very quickly to market fluctuations ( ie Recent gas prices propelling fuel sipping compacts up and SUVs and truck plummeting down) Meanwhile its competition is stuck with older less profitable inventory for longer, while CarMax is renewing and PRICING it's inventories at THE LOWER or most demanded market.
Used car retailer CarMax Inc. (KMX)posted a 20% rise in fiscal second-quarter net income but cut its earnings estimate for fiscal 2008 as the housing slump and subprime-mortgage crisis have slowed auto sales. Stock dropped as soon as this news posted. The stock is a good buy now that the price is lowered.